Abstract
This article investigates the extent of capital market interest rate convergence among six EU countries on the one hand, and a group of four countries with floating exchange rates - US, Germany, Japan, and Switzerland - on the other. We conclude that interest rate changes within the EU have been and still are converging gradually since 1980. Within the group of free-float currencies, the increase in convergence occurred abruptly around 1980, after which the extent of convergence remained roughly constant. Moreover, the presumed higher influence of US long-term interest rates on the level of German interest rates could not be detected.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
REFERENCES
Christiansen, H. and C. Pigot (1997), ‘Long-term Interest Rates in Globalised markets,’ OECD Working Paper, 175.
Cumby, R. and F. Mishkin (1986), ‘The International Linkage of Real interest Rates: the Europe-US Connection,’ Journal of International Money and Finance, 5, pp. 5–23.
Els, P.J.A. van and P.J.G. Vlaar (1996), ‘The Determination of Long-term Interest Rates in the Netherlands,’ in: BIS Conference Papers, 2, The Determination of Long-Term Interest Rates and Exchange Rates and the Role of Expectations, pp. 122–137.
Fase, M.M.G. (1973), ‘A Principal Components Analysis of Market Interest Rates in The Netherlands,’ 1962–1970, European Economic Review, 4, pp. 107–134.
Fase, M.M.G. (1976), ‘The Interdependence of Short-term Interest Rates in the Major Financial Centres of the World,’ Kyklos, 29, pp. 63–96.
Fase, M.M.G. (1981), ‘The Linkage of Stock-exchange Markets Between Countries,’ Economics Letters, 7, pp. 363–369.
Fase, M.M.G. and K. Steel (1987), ‘On Interest Rates in Belgium and The Netherlands: a Comparative Analysis of Interest Rate Developments and Financial Innovations, 1980–1984,’ De Economist, 135, pp. 316–319.
Frankel, J. (1992), ‘Measuring World Capital Mobility: a Review,’ American Economic Review, 88, pp. 197–202.
Gruijters, A.P.D. (1995), ‘Financiële Integratie en Monetair Beleid’ (Financial Integration and Monetary Policy – in Dutch) NIBE Publications Series, 78, Chapter 4.
Johansen, S. (1991), ‘Estimation and Hypothesis Testing of Cointegration in Vector Gaussian Autoregressive Models,’ Econometrica, 59, pp. 1551–1580.
Lawley, D.N. and A.W. Maxwell (1967), Factor Analysis as a Statistical Method, Butterworths, London.
Malinvaud, E. (1969), Méthodes Statistiques de l'Économetrie, Dunod, Paris.
Mishkin, F.S. (1984), ‘Are Interest Rates Equal Across Countries? An Empirical Investigation of International Parity Conditions,’ Journal of Finance, 39, pp. 1324–1357.
OECD (1996), ‘Have Long-term Interest Rates in the Three Major Economies Become Synchronised?’, Economic Outlook, 60, pp. 30–35.
Pigott, C. (1993), ‘International Interest Rate Convergence: a Survey of the Issues and Evidence,’ Federal Reserve Bank of New York Quarterly Review, 18, pp. 24–37.
Tesar, L.L. and I.M. Werner (1992), Home Bias and the Globalisation of Securities Markets, NBER Working Paper, 4218.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Fase, M., Vlaar, P. International Convergence of Capital Market Interest Rates. De Economist 146, 257–269 (1998). https://doi.org/10.1023/A:1003296928097
Issue Date:
DOI: https://doi.org/10.1023/A:1003296928097