IDEAS home Printed from https://ideas.repec.org/p/crt/wpaper/0515.html
   My bibliography  Save this paper

Term Structure Linkages Among the New EU Countries and the EMU

Author

Listed:
  • Minoas Koukouritakis

    () (Department of Economics, University of Crete, Greece)

  • Leo Michelis

    (Department of Economics, Ryerson University, Toronto, Canada)

Abstract

This paper uses cointegration and common trends techniques to investigate empirically the expectations hypothesis of the term structure of interest rates in the 10 new EU countries, and the 2 core EMU countries, France and Germany. By decomposing each term structure into its transitory and permanent components, we also analyze the possible short run and long run linkages among the term structures of these countries. The empirical results support the expectations theory of the term structure for all countries except Malta. Further, they point to both weak short run linkages and several strong long run linkages among the monetary policies of the 10 new EU and the core of the EMU. The group of the Central European countries and Latvia are prominent in the latter case.

Suggested Citation

  • Minoas Koukouritakis & Leo Michelis, 2005. "Term Structure Linkages Among the New EU Countries and the EMU," Working Papers 0515, University of Crete, Department of Economics.
  • Handle: RePEc:crt:wpaper:0515
    as

    Download full text from publisher

    File URL: http://economics.soc.uoc.gr/wpa/docs/Koukouritakis_Michelis_EMUTermStructure.pdf
    File Function: First version
    Download Restriction: no

    References listed on IDEAS

    as
    1. MacKinnon, James G & Haug, Alfred A & Michelis, Leo, 1999. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(5), pages 563-577, Sept.-Oct.
    2. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-472, August.
    3. Hafer, R. W. & Kutan, Ali M. & Su Zhou, 1997. "Linkage in EMS term structures: evidence from common trend and transitory components," Journal of International Money and Finance, Elsevier, vol. 16(4), pages 595-607, August.
    4. Holmes, Mark J & Pentecost, Eric J, 1997. "The Term Structure of Interest Rates and Financial Integration in the ERM," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 2(3), pages 237-247, July.
    5. Jondeau, Eric & Ricart, Roland, 1999. "The expectations hypothesis of the term structure: tests on US, German, French, and UK Euro-rates," Journal of International Money and Finance, Elsevier, vol. 18(5), pages 725-750, October.
    6. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    7. Gonzalo, Jesus & Granger, Clive W J, 1995. "Estimation of Common Long-Memory Components in Cointegrated Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 27-35, January.
    8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    9. Gerlach, Stefan & Smets, Frank, 1997. "The term structure of Euro-rates: some evidence in support of the expectations hypothesis," Journal of International Money and Finance, Elsevier, vol. 16(2), pages 305-321, April.
    10. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    11. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    12. Hall, Anthony D & Anderson, Heather M & Granger, Clive W J, 1992. "A Cointegration Analysis of Treasury Bill Yields," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 116-126, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Benjamin Tabak, 2009. "Testing the expectations hypothesis in the Brazilian term structure of interest rates: a cointegration analysis," Applied Economics, Taylor & Francis Journals, vol. 41(21), pages 2681-2689.
    2. Nikolaos Giannellis & Athanasios Papadopoulos, 2007. "Estimating the Equilibrium Effective Exchange Rate for Potential EMU Members," Open Economies Review, Springer, vol. 18(3), pages 307-326, July.

    More about this item

    Keywords

    Term Structure; EU Enlargement; Cointegration; Common Trends; Granger;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F15 - International Economics - - Trade - - - Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:crt:wpaper:0515. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kostis Pigounakis). General contact details of provider: http://edirc.repec.org/data/deuchgr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.