Testing for Real Interest Rate Convergence in European Countries

Stilianos Fountas and Jyh-lin Wu
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Jyh-lin Wu: Department of Economics, National University of Ireland, Galway

No 24, Working Papers from National University of Ireland Galway, Department of Economics

Abstract: We use cointegration tests that determine endogenously the regime shift to test for bilateral short-term and long-term real interest rate convergence in the European Monetary System in the 1979--1993 period. The results of these tests provide strong evidence in favour of bilateral real interest rate convergence between Germany and several countries in our sample, particularly for long-term real interest rates. This result carries the important policy implication that in several European countries monetary policy has lost some of its effectiveness as a stabilisation policy tool.

JEL-codes: F3 (search for similar items in EconPapers)
Date: 1998, Revised 1998
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Citations: View citations in EconPapers (13)

Published in the Scottish Journal of Political Economy, Vol. 46, No. 2, 1999

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Persistent link: https://EconPapers.repec.org/RePEc:nig:wpaper:0024

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