The Effect of Monetary Unification on German Bond Markets

24 Pages Posted: 6 Sep 2004

See all articles by Hans Dewachter

Hans Dewachter

Catholic University of Leuven (KUL) - Department of Economics; Erasmus Research Institute of Management (ERIM)

Marco Lyrio

Insper Institute of Education and Research

Stan Maes

European Commission - DG Internal market and financial services; European Commission - DG Competition; KU Leuven - Department of Economics

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Abstract

We develop a benchmark against which the effects of ECB monetary policy on the German bond market can be evaluated. We first estimate an affine term structure model for the pre-EMU period linking the German yield curve with the Bundesbank monetary policy. The German monetary policy and its implied yield curve are then reprojected onto the EMU period. The reprojected yield curve differs significantly from the observed one. Short-term interest rates during the EMU period are significantly lower than they would have been in case the Bundesbank were still in charge of monetary policy. Furthermore, yield spreads increased substantially during the EMU period.

Suggested Citation

Dewachter, Hans and Lyrio, Marco and Maes, Konstantijn, The Effect of Monetary Unification on German Bond Markets. Available at SSRN: https://ssrn.com/abstract=584087

Hans Dewachter (Contact Author)

Catholic University of Leuven (KUL) - Department of Economics ( email )

Center for Economic Studies
Naamsestraat 69
Leuven, B-3000
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+0032 16 326859 (Phone)
+0032 16 326796 (Fax)

Erasmus Research Institute of Management (ERIM)

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Netherlands

Marco Lyrio

Insper Institute of Education and Research ( email )

R Quata 300
Sao Paulo, 04542-030
Brazil

HOME PAGE: http://www.insper.edu.br/en/faculty-and-research/marco-lyrio

Konstantijn Maes

European Commission - DG Internal market and financial services ( email )

Rue de la Loi 200
Brussels, B-1049
Belgium

European Commission - DG Competition ( email )

Place Madou, Madouplein 1
Saint-Josse-ten-Noode/Sint-Joost-ten-Noode
Brussels, B-1049
Belgium

KU Leuven - Department of Economics ( email )

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2nd Floor
B-3000 Leuven
Belgium

HOME PAGE: http://www.econ.kuleuven.ac.be/ew/academic/intecon

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