Additional Evidenceon Ems Interest Rate Linkages

Author/Editor:

John Thornton ; Alicia García-Herrero

Publication Date:

October 1, 1996

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This note examines interest rate linkages within the EMS. Cointegration tests suggest the existence of a long-run equilibrium relationship between German and other EMS interest rates. Bivariate VAR analysis finds that Granger-causality either stems from German to other European interest rates (Belgium, France, Spain, and the U.K.) or is bidirectional (Denmark and the Netherlands). When allowance is made for the influence of U.S. interest rates, the pattern of Granger causality is predominantly bidirectional.

Series:

Working Paper No. 1996/115

Subject:

Exchange rates Foreign exchange National accounts Return on investment

English

Publication Date:

October 1, 1996

ISBN/ISSN:

9781451942941/1018-5941

Stock No:

WPIEA1151996

Pages:

16

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