Abstract

http://ssrn.com/abstract=2031473
 


 



A Dynamic Approach to Interest Rate Convergence in Selected Euro-Candidate Countries


Hubert Gabrisch


Halle Institute for Economic Research

Lucjan T. Orlowski


Sacred Heart University - John F. Welch College of Business

March 30, 2012


Abstract:     
We advocate a dynamic approach to monetary convergence to a common currency that is based on the analysis of financial system stability. Accordingly, we empirically test volatility dynamics of the ten-year sovereign bond yields of the 2004 EU accession countries in relation to the eurozone yields during the January 2, 2001 until January 22, 2009 sample period. Our results show a varied degree of bond yield co-movements, the most pronounced for the Czech Republic, Slovenia and Poland, and weaker for Hungary and Slovakia. However, since the EU accession, we find some divergence of relative bond yields. We argue that a ‘static’ specification of the Maastricht criterion for long-term bond yields is not fully conducive for advancing stability of financial systems in the euro-candidate countries.

Number of Pages in PDF File: 27

Keywords: interest rate convergence, common currency area, new EU Member States, interest rate risk, GARCH

JEL Classification: E44, F36

working papers series


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Date posted: April 1, 2012  

Suggested Citation

Gabrisch, Hubert and Orlowski, Lucjan T., A Dynamic Approach to Interest Rate Convergence in Selected Euro-Candidate Countries (March 30, 2012). Available at SSRN: http://ssrn.com/abstract=2031473 or http://dx.doi.org/10.2139/ssrn.2031473

Contact Information

Hubert Gabrisch (Contact Author)
Halle Institute for Economic Research ( email )
P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany
Lucjan T. Orlowski
Sacred Heart University - John F. Welch College of Business ( email )
5151 Park Avenue
Fairfield, CT 06825
United States
203-371-7858 (Phone)
HOME PAGE: http://www.sacredheart.edu/ltorlowski.cfm
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