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Equal Size, Equal Role? Interest Rate Interdependence Between the Euro Area and the United States

Author

Listed:
  • Michael Ehrmann
  • Marcel Fratzscher

Abstract

This article investigates whether the degree of interdependence between the US and the euro area has changed with EMU by analysing the effects of monetary policy and macroeconomic news on daily interest rates in the two economies. The article finds a strongly increased interdependence of money markets around EMU. Spillover effects from the US to the euro area remain stronger than in the opposite direction, but US markets have started reacting to euro area developments. In recent years certain US macroeconomic news affect euro area money markets and have become good leading indicators for the euro area. Copyright 2005 Royal Economic Society.

Suggested Citation

  • Michael Ehrmann & Marcel Fratzscher, 2005. "Equal Size, Equal Role? Interest Rate Interdependence Between the Euro Area and the United States," Economic Journal, Royal Economic Society, vol. 115(506), pages 928-948, October.
    • Handle: RePEc:ecj:econjl:v:115:y:2005:i:506:p:928-948
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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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