Equal size, equal role? Interest rate interdependence between the euro area and the United States

Michael Ehrmann () and Marcel Fratzscher ()

No 342, Working Paper Series from European Central Bank

Abstract: This paper investigates whether the degree of interdependence between the United States and the euro area economies has changed with the advent of EMU. It addresses this issue from the perspective of financial markets by analysing the effects of monetary policy and macroeconomic news on daily interest rates. First, the paper finds that the interdependence of money markets has increased strongly around EMU. Although spillover effects from the United States to the euro area remain stronger than in the opposite direction, US markets have started reacting to euro area developments since the onset of EMU. Second, certain US macroeconomic news affect euro area money markets, especially in recent years. Finally, we show that US macroeconomic news have become good leading indicators for economic developments in the euro area, indicating that the higher money market interdependence is at least partly explained by the increased real integration of the two economies.

Keywords: interdependence; announcements; news; money markets; real-time data; United States; euro area. (search for similar items in EconPapers)
JEL-codes: E43 E52 F42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-fmk, nep-mac and nep-mon
Date: 2004-04
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Related works:
Working Paper: Equal size, equal role? interest rate interdependence between the euro area and the United States (2004)
Journal Article: Equal Size, Equal Role? Interest Rate Interdependence Between the Euro Area and the United States (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:ecb:ecbwps:20040342

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