Interest Rate Convergence in the Euro-Candidate Countries: Volatility Dynamics of Sovereign Bond Yields
AbstractWe advocate a dynamic approach to monetary convergence to a common currency that is based on the analysis of financial system stability. Accordingly, we test empirically volatility dynamics of the ten-year sovereign bond yields of the 2004 EU accession countries in relation to the eurozone yields during the January 2, 2001- January 22, 2009 sample period. Our results show a varied degree of bond yield co-movements, the most pronounced for the Czech Republic, Slovenia and Poland, and weaker for Hungary and Slovakia. However, since the EU accession, we find some divergence of relative bond yields. We argue that a ‘static’ specification of the Maastricht criterion for long-term bond yields is not fully conducive for advancing stability of financial systems in the euro-candidate countries.
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Bibliographic InfoPaper provided by Sacred Heart University, John F. Welch College of Business in its series Working Papers with number 2009001.
Length: 26 pages
Date of creation: Apr 2009
Date of revision:
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Web page: http://www.sacredheart.edu/pages/15_john_f_welch_college_of_business.cfm
More information through EDIRC
interest rate convergence; common currency area; new EU Member States; interest rate risk; GARCH;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-06-03 (All new papers)
- NEP-CBA-2009-06-03 (Central Banking)
- NEP-EEC-2009-06-03 (European Economics)
- NEP-MAC-2009-06-03 (Macroeconomics)
- NEP-MON-2009-06-03 (Monetary Economics)
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.:
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2012002, Sacred Heart University, John F. Welch College of Business.
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