Interest Rate Linkages Within the European Monetary System: A Time Series Analysis: Note

Karfakis, Costas; Moschos, Demetrios

doi:10.2307/1992567

Cited by 123 publications

(83 citation statements)

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“…Given the findings of previous papers, we would have expected to have found greater causality running from Germany to the other countries9 . A result obtained in this paper which complements the results of Hafer and Kutan (1994), Karfakis and Moschos (1990), and Katsimbris and Miller (1993) is that the Dutch rates Granger-cause the German rates. In our study this result applies in both time periods.…”

Section: Discussionsupporting

confidence: 84%

“…MacDonald and Taylor (1991), Hafer and Kutan (1994) and Henry and Weidmann (1994) find some evidence supporting convergence. The GDH is supported by evidence provided by Karfakis and Moschos (1990), MacDonald and Taylor (1991), Henry and Weidmann (1994) and Hafer and Kutan (1994) when monetary policy is proxied by monetary base. Henry and Weidmann (1994) find also that following the German unification, the asymmetric nature of the ERM appears stronger.…”

Section: A Review Of the Literaturementioning

confidence: 82%

“…Hafer and Kutan (1994) found Belgium, France, and the Netherlands to be influenced by changes in the German rate8 . Karfakis and Moschos (1990) found that the German rate 8Hafer and Kutan (1994) follow MacDonald and Taylor (1991) and use the VAR expressed in levels without an error-correction term to test for Granger-causality. This approach is asymptotically equivalent to using first differences and an error-correction term.…”

Section: Discussionmentioning

confidence: 99%

“…Studies along this line of research can be classified into two groups: (a) Bilateral approaches look at pairs of countries that include Germany. Examples include Giavazzi andGiovannini (1989), de Grauwe (1989), Karfakis and Moschos (1990) and Katsimbris and Miller (1993).…”

Section: A Review Of the Literaturementioning

confidence: 99%

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Testing for monetary policy convergence in European countries

Bredin

Fountas

1998

Journal of Economic Studies

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The paper tests for long-run monetary policy convergence and short-run policy interactions in seven ERM countries over the 1979-1992 period using the approach of multivariate cointegration and Granger-causality tests. We provide evidence for very little monetary policy convergence, even during the more stable 1987-1992 period. Our tests for short-run monetary policy interactions show that, in agreement with some other studies, Germany is not the leader country in the system as it appears to accommodate shocks in other member countries. Our tests show also that full monetary policy convergence applied among Germany, Belgium and Netherlands in the 1987-1992 period implying that these countries could be the first to join a European monetary union should a two-speed approach to monetary union become a reality.

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Section: Discussionsupporting

confidence: 84%

Section: A Review Of the Literaturementioning

confidence: 82%

Section: Discussionmentioning

confidence: 99%

Section: A Review Of the Literaturementioning

confidence: 99%

See 2 more Smart Citations

Testing for monetary policy convergence in European countries

Bredin

Fountas

1998

Journal of Economic Studies

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“…Their results rather support the idea of multidirectional linkages within the EMS, attributing the Bundesbank an important, yet not dominant role. Karfakis and Moschos (1990), on the other hand, fail to reject the GDH. 1 They conclude that German interest rates Granger-cause other EMS members' rates in a bivariate setup.…”

Section: Introductionmentioning

confidence: 96%

Does the euro dominate Central and Eastern European money markets?

Kadow¹,

Cerrato²,

MacDonald³

et al. 2013

Journal of International Money and Finance

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The so-called German Dominance Hypothesis (GDH) claimed that Bundesbank policies were transmitted into other European Monetary System (EMS) interest rates during the pre-euro era. We reformulate this hypothesis for the Central and Eastern European (CEE) countries that are on the verge of accessing the eurozone. We test this "Euro Dominance Hypothesis (EDH)" in a novel way using a global vector autoregressive (GVAR) approach that combines country-specific error correction models in a global system. We find that euro area monetary policies are transmitted into CEE interest rates which provides evidence for monetary integration between the eurozone and CEE countries. Our framework also allows for introducing global monetary shocks to provide empirical evidence regarding the effects of the recent financial crisis on monetary integration in Europe.

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Irreducibility and structural cointegrating relations: an application to the G‐7 long‐term interest rates

2001

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In this paper we examine the causal linkages between the G-7 long-term interest rates by using a new technique, which enables the researcher to analyse relations between a set of I(1) series without imposing any identification conditions based on economic theory. Specifically, we apply the so-called Extended Davidson's Methodology (EDM), which is based on the innovative concept of an irreducible cointegrating (IC) vector, defined as a subset of a cointegrating relation that does not have any cointegrated subsets. Ranking the irreducible vectors according to the criterion of minimum variance allows us to distinguish between structural and solved relations. The empirical results provide support for the hypothesis that larger, more stable economies can achieve policy objectives more successfully by accommodating rather than driving other countries' policies. It appears that the driving force is Canada, which is linked to the USA, UK and France in three out of the four fundamental relations, and which is a reference point for the US, Italian and German rates, which are not cointegrated, seem to be determined by country-specific factors.

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Interest Rate Linkages Within the European Monetary System: A Time Series Analysis: Note

Cited by 123 publications

References 0 publications

Testing for monetary policy convergence in European countries

Testing for monetary policy convergence in European countries

Does the euro dominate Central and Eastern European money markets?

Irreducibility and structural cointegrating relations: an application to the G‐7 long‐term interest rates

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