RIP and the shift toward a monetary union: Looking for a “euro effect” by a structural break analysis with panel data

This paper aims to evaluate how the ex ante real interest rates of Euro area countries have been modified by the introduction of the euro. We use cointegration analysis with endogenous breaks in a panel data context. Our results show that the “euro effect” is significant in our sample and that after...

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Bibliographic Details
Published in:Journal of international financial markets, institutions & money institutions & money, 2009-04, Vol.19 (2), p.336-350
Main Authors: Maveyraud-Tricoire, Samuel, Rous, Philippe
Format: Article
Language:English
Subjects:
Economic and Monetary Union
Economics and Finance
Euro
Europe
European integration
Humanities and Social Sciences
Interest rates
Panel data
RIP
RIP European integration Panel data
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Summary:This paper aims to evaluate how the ex ante real interest rates of Euro area countries have been modified by the introduction of the euro. We use cointegration analysis with endogenous breaks in a panel data context. Our results show that the “euro effect” is significant in our sample and that after the introduction of the euro, the real interest parity (RIP) holds. This last conclusion is due to a decrease in the nominal interest rate differentials rather than to a reduction in goods and services price differentials and in the exchange rate volatility.
ISSN:1042-4431
1873-0612
DOI:10.1016/j.intfin.2008.01.005