Are Shocks to Interest Rate Volatility Symmetric Across EU Countries?

41 Pages Posted: 8 Feb 2002

See all articles by Javier Gómez Biscarri

Javier Gómez Biscarri

Universitat Pompeu Fabra; Barcelona Graduate School of Economics (Barcelona GSE)

Teresa Gil Aldea

University of Navarra - Pamplona Campus

Abstract

In this paper we analyze the degree to which European economies are hit by symmetric shocks. We study shocks that lead to an increased volatility of the interest rate and model the behavior of European short term interest rates as having two regimes that correspond to high and low volatility of the rate. We use a bivariate switching regime model to compare the behavior over time of the Spanish interest rate with that of the four major EU countries. We find that the symmetry of shocks received by these countries in the years prior to the monetary union was not strong, thus giving evidence against the convenience of a unified monetary policy.

Keywords: Interest Rate Volatility, Switching Regime, EMU, Symmetry

JEL Classification: E43, C32, F36

Suggested Citation

Gómez Biscarri, Javier and Gil Aldea, Teresa, Are Shocks to Interest Rate Volatility Symmetric Across EU Countries?. Available at SSRN: https://ssrn.com/abstract=299379 or http://dx.doi.org/10.2139/ssrn.299379

Javier Gómez Biscarri (Contact Author)

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas, 25-27
Barcelona, E-08005
Spain

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

Teresa Gil Aldea

University of Navarra - Pamplona Campus ( email )

Campus de Arrosadia
Department of Economics
31006 Pamplona
Spain
34 948 425625 (Phone)

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