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

Hubert Gabrisch and Lucjan Orlowski

Emerging Markets Finance and Trade, 2010, vol. 46, issue 6, 69-85

Abstract: We argue that a "static" specification of the Maastricht criterion for long-term bond yields is not conducive to assessing stability of financial systems in euro-candidate countries. Instead, we advocate a dynamic approach to assessing interest rate convergence to a common currency that is based on the analysis of financial system stability. Accordingly, we empirically test 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 the relationship between domestic and eurozone sovereign bond yields, the most pronounced for the Czech Republic, Slovenia, and Poland, and weaker for Hungary and Slovakia. We find some divergence of relative bond yields since the EU accession.

Keywords: common currency area; GARCH; interest rate convergence; interest rate risk; new EU member states (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://mesharpe.metapress.com/link.asp?target=contribution&id=24U7W81713882786 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Interest Rate Convergence in the Euro-Candidate Countries: Volatility Dynamics of Sovereign Bond Yields (2009)
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: https://EconPapers.repec.org/RePEc:mes:emfitr:v:46:y:2010:i:6:p:69-85

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MREE20

Access Statistics for this article

More articles in Emerging Markets Finance and Trade from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().