EMU and Long Interest Rates in Germany

Author/Editor:

Jeromin Zettelmeyer

Publication Date:

December 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:

The presence of an “EMU premium” in German long rates is tested by examining the co-movement of German and other European yields, as well as the exchange rate of the private ECU, in reaction to EMU-related events. If German yields incorporate an “EMU premium” while other European currencies expect lower interest rates from EMU, then German and other European long yields should react in opposite directions to events affecting the probability of EMU. In fact, they typically react in the same direction. Similarly, events which lead to an appreciation of the private ECU are associated with a decline in German yields.

Series:

Working Paper No. 1996/133

Subject:

Bond yields Bonds Currencies Financial institutions Financial markets Financial services Money Securities markets Yield curve

English

Publication Date:

December 1, 1996

ISBN/ISSN:

9781451855449/1018-5941

Stock No:

WPIEA1331996

Pages:

40

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