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There Was Monetary Autonomy In Europe On the Eve Of Emu? The German Dominance Hypothesis Re-Examined

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Author Info
Oscar Bajo () (Departamento de Economia - UPNA)
Maria Dolores Montavez ()

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Abstract

In this paper we re-examine the German dominance hypothesis, as a way to assess whether the loss of monetary autonomy in Europe associated with EMU had been significant. We use Granger-causality tests between the interest rates of Germany and all the countries participating at any time in the European Monetary System, with the sample period running until December 1998. Our results would support a weak version of the hypothesis, with Germany playing a certain ³leadership² or special role in the EMS, although she would not had been strictly the ³dominant² player.

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Publisher Info
Paper provided by Departamento de Economía - Universidad Pública de Navarra in its series Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra with number 9906.

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Length: 20 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:nav:ecupna:9906

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Related research
Keywords: European monetary union; German dominance hypothesis; Granger-causality;

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Find related papers by JEL classification:
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Cohen, Daniel & Wyplosz, Charles, 1989. "The European Monetary Union: An Agnostic Evaluation," CEPR Discussion Papers 306, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Caporale, Guglielmo Maria & Pittis, Nikitas, 1995. "Interest Rate Linkages within the European Monetary System: An Alternative Interpretation," Applied Economics Letters, Taylor and Francis Journals, vol. 2(2), pages 45-47, February. [Downloadable!] (restricted)
  3. Hassapis, Christis & Pittis, Nikitas & Prodromidis, Kyprianos, 1999. "Unit roots and Granger causality in the EMS interest rates: the German Dominance Hypothesis revisited," Journal of International Money and Finance, Elsevier, vol. 18(1), pages 47-73, January. [Downloadable!] (restricted)
  4. Giavazzi, Francesco & Pagano, Marco, 1986. "The Advantages of Tying One's Hands: EMS Discipline and Central Bank Credibility," CEPR Discussion Papers 135, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March. [Downloadable!] (restricted)
  6. Katsimbris, George M & Miller, Stephen M, 1993. "Interest Rate Linkages within the European Monetary System: Further Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(4), pages 771-79, November. [Downloadable!] (restricted)
  7. Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, vol. 58(1), pages 165-93, January. [Downloadable!] (restricted)
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  8. Artis, Michael J & Zhang, W, 1997. "International Business Cycles and the ERM: Is There a European Business Cycle?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 2(1), pages 1-16, January. [Downloadable!] (restricted)
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  9. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July. [Downloadable!] (restricted)
  10. Henry, Jerome & Jens Weidmann, 1994. "Asymmetry in the EMS revisited: Evidence from the causality analysis of daily Eurorates," Discussion Paper Serie B 280, University of Bonn, Germany.
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  11. Koedijk, Kees G. & Kool, Clemens J. M., 1992. "Dominant interest and inflation differentials within the EMS," European Economic Review, Elsevier, vol. 36(4), pages 925-943, May. [Downloadable!] (restricted)
  12. Hsiao, Cheng, 1981. "Autoregressive modelling and money-income causality detection," Journal of Monetary Economics, Elsevier, vol. 7(1), pages 85-106. [Downloadable!] (restricted)
  13. Mélitz, Jacques, 1988. "Monetary Discipline and Cooperation in the European Monetary System: A Synthesis," CEPR Discussion Papers 219, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  14. Phillips, Peter C B & Hansen, Bruce E, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," Review of Economic Studies, Blackwell Publishing, vol. 57(1), pages 99-125, January. [Downloadable!] (restricted)
  15. Wyplosz, Charles, 1997. "EMU: Why and How It Might Happen," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 3-21, Fall. [Downloadable!] (restricted)
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  16. Peter C.B. Phillips & Bruce E. Hansen, 1988. "Statistical Inference in Instrumental Variables," Cowles Foundation Discussion Papers 869R, Cowles Foundation, Yale University, revised Apr 1989. [Downloadable!]
  17. Karfakis, Costas J & Moschos, Demetrios M, 1990. "Interest Rate Linkages within the European Monetary System: A Time Series Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(3), pages 389-94, August.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Forssbaeck, Jens & Oxelheim, Lars, 2005. "On the Link between Exchange-Rate Regimes and Monetary-Policy Autonomy: The European Experience," Working Paper Series 637, Research Institute of Industrial Economics. [Downloadable!]
  2. Óscar Bajo Rubio & Simón Sosvilla Rivero & Fernando Fernández Rodríguez, 2000. "Asymmetry In The Ems: New Evidence Based On Non-Linear Forecasts," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 0001, Departamento de Economía - Universidad Pública de Navarra. [Downloadable!]
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