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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.

Suggested Citation

  • Jakob de Haan & Tigran Poghosyan, 2007. "Interest Rate Linkages in EMU Countries: A Rolling Threshold Vector Error-Correction Approach," CESifo Working Paper Series 2060, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_2060

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    References listed on IDEAS

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    Cited by:

    1. An-Pin Wei & Wei-Ling Huang & Chih-Yuan Yang & Ming-Chi Chen, 2013. "The role of market imperfections in the relationship between housing prices and household credit: Evidence from Taiwan," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 27(2), pages 131-143, November.
    2. Lindenberg, Nannette & Westermann, Frank, 2012. "Common trends and common cycles among interest rates of the G7-countries," Journal of Macroeconomics, Elsevier, vol. 34(4), pages 1125-1140.
    3. Mendonca, Gui Pedro, 2008. "Structural Breaks, Regime Change and Asymmetric Adjustment: A Short and Long Run Global Approach to the Output/Unemployment Dynamics," MPRA Paper 14648, University Library of Munich, Germany.


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