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External Macroeconomic Factors and the Link between Short- and Long-Run European Interest Rates: A Note


  • Mariam Camarero

    () (Department of Economics, Jaume I University, Avda. Sos Baynat, s/n, 12530, Castellon, Spain)

  • Javier Ordonez

    () (Department of Economics, Jaume I University, Avda. Sos Baynat, s/n, 12530, Castello´n, Spain)

  • Cecilio Tamarit

    () (Department of Applied Economics II, University of Valencia, Valencia, P.O. Box 22.006, Spain)


This article analyzes the long-run relationships linking long- and short-run interest rates for the Euro-wide aggregated variables. To this end, we extend the set of variables traditionally involved in the Campbell and Shiller (1987) framework for the term structure to add external macro variables (the exchange rate, U.S. inflation, and U.S. short-run interest rates). Our results support the expectations hypothesis and also stress the importance of accounting for foreign economy influences on European monetary policy, namely, the real exchange rate of the American dollar as well as real interest rates.

Suggested Citation

  • Mariam Camarero & Javier Ordonez & Cecilio Tamarit, 2009. "External Macroeconomic Factors and the Link between Short- and Long-Run European Interest Rates: A Note," Southern Economic Journal, Southern Economic Association, vol. 75(4), pages 1212-1219, April.
  • Handle: RePEc:sej:ancoec:v:75:4:y:2009:p:1212-1219

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • 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


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