Decoupling euro area and US yield curves

Benoit Mojon and Fulvio Pegoraro ()

Rue de la Banque, 2014, issue 01

Abstract: The levels and amplitudes of fluctuations of longer-term US and euro area interest rates have been quite similar since 2001, with an exception from 2005 to 2007 when euro area rates were lower. We show that interest rate differentials between the United States and the euro area usually reflect differences in inflation and GDP forecasts. Given that the cyclical gap between the United States and the euro area is rising back to the levels observed in 2004 and 2005, a decoupling between US and euro area interest rates could be sizeable and persistent.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:rueban:2014:01

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