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How Germany benefits the most from its Eurozone membership

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  • Juneja, Januj

Abstract

Post-institutionalization, the Eurozone has seen a marked increase in the integration of its financial markets. An important outcome of this has been the elimination of exchange rate risk because of the introduction of a common currency. We study the effect of this integration through a discrete-time affine term structure model with state variables obtained from the application of two extensions of principal components analysis to the multi-country setting by focusing on seven members of the Eurozone. Our results, derived from formulating and testing three hypotheses, show that Germany has gained disparately larger benefits from its membership in the Eurozone.

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  • Juneja, Januj, 2017. "How Germany benefits the most from its Eurozone membership," Research in International Business and Finance, Elsevier, vol. 42(C), pages 1074-1088.
    • Handle: RePEc:eee:riibaf:v:42:y:2017:i:c:p:1074-1088
    DOI: 10.1016/j.ribaf.2017.07.042
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    More about this item

    Keywords

    E43; E44; F36; C38; Affine term structure model; Principal components analysis; Eurozone; Financial market integration; Economic benefits;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis

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