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Do real interest rates converge? Evidence from the European Union

Arghyrou, Michael, Gregoriou, Andros and Kontonikas, Alexandros 2007. Do real interest rates converge? Evidence from the European Union. [Working Paper]. Cardiff Economics Working Papers, Cardiff: Cardiff University.

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Abstract

We test for real interest parity (RIP) in the EU25 area. Our contribution is two-fold: First, we account for the previously overlooked effects of structural breaks on real interest rate differentials. Second, we test for RIP against the EMU average. For the majority of our sample countries we obtain evidence of real interest rate convergence towards the latter. Convergence, however, is a gradual process subject to structural breaks, typically falling close to the launch of the euro. Our findings have important implications relating to the single monetary policy and the progress new EU members have achieved towards joining the euro.

Item Type: Monograph (Working Paper)
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HB Economic Theory
Publisher: Cardiff University
Date of First Compliant Deposit: 30 March 2016
Last Modified: 04 Jun 2017 08:25
URI: http://orca.cf.ac.uk/id/eprint/77773

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