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External Macroeconomic Factors and the Link between Short- and Long-Run European Interest Rates: A Note

Mariam Camarero (), Javier Ordóñez () and Cecilio Tamarit

Southern Economic Journal, 2009, vol. 75, issue 4, 1212-1219

Abstract: This article analyzes the long-run relationships linking long- and short-run interest rates for the Euro-wide aggregated variables. To this end, we extend the set of variables traditionally involved in the Campbell and Shiller (1987) framework for the term structure to add external macro variables (the exchange rate, U.S. inflation, and U.S. short-run interest rates). Our results support the expectations hypothesis and also stress the importance of accounting for foreign economy influences on European monetary policy, namely, the real exchange rate of the American dollar as well as real interest rates.

JEL-codes: C32 E43 E52 (search for similar items in EconPapers)
Date: 2009
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Handle: RePEc:sej:ancoec:v:75:4:y:2009:p:1212-1219