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Interest Rate Linkages in EMU Countries: A Rolling Threshold Vector Error-Correction Approach

  • Jakob de Haan
  • Tigran Poghosyan

This paper revisits financial market integration in the European Economic and Monetary Union, using a threshold vector error-correction model (TVECM) for a fixed rolling window. This approach enables us to analyze the dynamics of transaction costs and detect any co-movements with (policy induced) changes in the financial environment. The TVECM methodology is applied on interest rates from different financial markets (government bonds, deposits, loans and mortgages) in Germany, France, Italy, Belgium and the Netherlands for the 1980-2006 period. Our main finding is that only for some country pairs and financial market segments there is evidence in support of financial integration.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2060.

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Date of creation: 2007
Date of revision:
Handle: RePEc:ces:ceswps:_2060
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  1. Franses,Philip Hans & Dijk,Dick van, 2000. "Non-Linear Time Series Models in Empirical Finance," Cambridge Books, Cambridge University Press, number 9780521779654.
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