Spill-over effects of monetary policy: a progress report on interest rate convergence in Europe
This study examines differences in the interest rate response to an ECB policy impulse in the euro area, the new EU-member states, and in the other non-eurozone EU countries in order to gauge the degree of interest rate alignment in Europe. To this end, PANIC, a Panel Analysis of Non-stationarity in I diosyncratic and Common components, is employed in a structural factor set-up. Under the assumption that the ECB sets the short end of the yield curve, the analysis shows that : (i) The response of Europe's money and government bond markets to new information can be summarized by two common stochastic trends and one stationary common factor, which together explain more than 68% of the overall variation of the two market segments; (ii) one of the factor innovations can be associated with the ECB's policy stance, which strongly affects the short end of the euro area's yield curve; (iii) compared to the euro area, the short-term market segments in the new EU-member states react, on average, 12% more weakly to the monetary policy signal, whereas these countries' long-term government bond yields respond up to 25% more strongly to such a common innovation.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Postal: Postfach 10 06 02, 60006 Frankfurt|
Phone: 0 69 / 95 66 - 34 55
Fax: 0 69 / 95 66 30 77
Web page: http://www.bundesbank.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jushan Bai & Serena Ng, 2002.
"Determining the Number of Factors in Approximate Factor Models,"
Econometric Society, vol. 70(1), pages 191-221, January.
- Tom Doan, . "BAING: RATS procedure to estimate factors in a factor model using Bai-Ng formulas," Statistical Software Components RTS00012, Boston College Department of Economics.
- Jushan Bai & Serena Ng, 2000. "Determining the Number of Factors in Approximate Factor Models," Boston College Working Papers in Economics 440, Boston College Department of Economics.
- Jushan Bai & Serena Ng, 2000. "Determining the Number of Factors in Approximate Factor Models," Econometric Society World Congress 2000 Contributed Papers 1504, Econometric Society.
- Forni, Mario & Hallin, Marc & Lippi, Marco & Reichlin, Lucrezia, 2004.
"The generalized dynamic factor model consistency and rates,"
Journal of Econometrics,
Elsevier, vol. 119(2), pages 231-255, April.
- Mario Forni & Marc Hallin & Marco Lippi & Lucrezia Reichlin, 2004. "The generalised dynamic factor model: consistency and rates," ULB Institutional Repository 2013/10133, ULB -- Universite Libre de Bruxelles.
- Mario Forni & Marc Hallin & Marco Lippi & Lucrezia Reichlin, 2000.
"The Generalized Dynamic-Factor Model: Identification And Estimation,"
The Review of Economics and Statistics,
MIT Press, vol. 82(4), pages 540-554, November.
- Mario Forni & Marc Hallin & Lucrezia Reichlin & Marco Lippi, 2000. "The generalised dynamic factor model: identification and estimation," ULB Institutional Repository 2013/10143, ULB -- Universite Libre de Bruxelles.
- Forni, Mario & Hallin, Marc & Lippi, Marco & Reichlin, Lucrezia, 1999. "The Generalized Dynamic Factor Model: Identification and Estimation," CEPR Discussion Papers 2338, C.E.P.R. Discussion Papers.
- Stock J.H. & Watson M.W., 2002. "Forecasting Using Principal Components From a Large Number of Predictors," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 1167-1179, December.
- Domenico Giannone & Lucrezia Reichlin & Luca Sala, 2005.
"Monetary Policy in Real Time,"
284, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Lucrezia Reichlin & Domenico Giannone & Luca Sala, . "Monetary policy in real time," ULB Institutional Repository 2013/10177, ULB -- Universite Libre de Bruxelles.
- Domenico Giannone & Lucrezia Reichlin & Luca Sala, 2005. "Monetary policy in real time," ULB Institutional Repository 2013/6401, ULB -- Universite Libre de Bruxelles.
- Giannone, Domenico & Reichlin, Lucrezia & Sala, Luca, 2005. "Monetary Policy in Real Time," CEPR Discussion Papers 4981, C.E.P.R. Discussion Papers.
- Carstensen, Kai, 2003.
"Nonstationary term premia and cointegration of the term structure,"
Munich Reprints in Economics
19944, University of Munich, Department of Economics.
- Carstensen, Kai, 2003. "Nonstationary term premia and cointegration of the term structure," Economics Letters, Elsevier, vol. 80(3), pages 409-413, September.
- 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 116-26, February.
- Ross, Stephen A., 1976. "The arbitrage theory of capital asset pricing," Journal of Economic Theory, Elsevier, vol. 13(3), pages 341-360, December.
- Kim, Suk-Joong & Lucey, Brian M. & Wu, Eliza, 2006. "Dynamics of bond market integration between established and accession European Union countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(1), pages 41-56, February.
- James H. Stock & Mark W. Watson, 2005. "Implications of Dynamic Factor Models for VAR Analysis," NBER Working Papers 11467, National Bureau of Economic Research, Inc.
- James H. Stock & Mark W. Watson, 1998. "Diffusion Indexes," NBER Working Papers 6702, National Bureau of Economic Research, Inc.
- Monika Piazzesi, 2005. "Bond Yields and the Federal Reserve," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 311-344, April.
- Ignazio Angeloni & Michael Flad & Francesco Paolo Mongelli, 2005. "Economic and monetary integration of the new Member States - helping to chart the route," Occasional Paper Series 36, European Central Bank.
- Jushan Bai & Serena Ng, 2001.
"A Panic Attack on Unit Roots and Cointegration,"
Economics Working Paper Archive
469, The Johns Hopkins University,Department of Economics.
- Solnik, Bruno, 1983. " International Arbitrage Pricing Theory," Journal of Finance, American Finance Association, vol. 38(2), pages 449-57, May.
- Giannone, Domenico & Reichlin, Lucrezia & Sala, Luca, 2002. "Tracking Greenspan: Systematic and Unsystematic Monetary Policy Revisited," CEPR Discussion Papers 3550, C.E.P.R. Discussion Papers.
When requesting a correction, please mention this item's handle: RePEc:zbw:bubdp1:6343. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.