Interest Rate Convergence in the Euro-Candidate Countries: Volatility Dynamics of Sovereign Bond Yields

Hubert Gabrisch () and Lucjan T. Orlowski ()

No 2009001, Working Papers from Sacred Heart University, John F. Welch College of Business

Abstract: We advocate a dynamic approach to monetary convergence to a common currency that is based on the analysis of financial system stability. Accordingly, we test empirically volatility dynamics of the ten-year sovereign bond yields of the 2004 EU accession countries in relation to the eurozone yields during the January 2, 2001- January 22, 2009 sample period. Our results show a varied degree of bond yield co-movements, the most pronounced for the Czech Republic, Slovenia and Poland, and weaker for Hungary and Slovakia. However, since the EU accession, we find some divergence of relative bond yields. We argue that a ‘static’ specification of the Maastricht criterion for long-term bond yields is not fully conducive for advancing stability of financial systems in the euro-candidate countries.

Keywords: interest rate convergence; common currency area; new EU Member States; interest rate risk; GARCH (search for similar items in EconPapers)
JEL-codes: E44 F36 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
Date: 2009-04
View list of references

Downloads: (external link)
http://repec.sacredheart.edu/she/pdf/wp2009_001.pdf First version, 2009 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:she:wpaper:2009001

Access Statistics for this paper

More papers in Working Papers from Sacred Heart University, John F. Welch College of Business
Contact information at EDIRC.
Series data maintained by Dr. Khawaja Mamun ().