The term structure of interest rates in the 12 newest EU countries

Minoas Koukouritakis (m.koukouritakis@uoc.gr) and Leo Michelis

Applied Economics, 2008, vol. 40, issue 4, 479-490

Abstract: This article uses cointegration and common trends techniques to investigate empirically the expectations hypothesis of the term structure of interest rates for the 10 new EU countries, along with Bulgaria and Romania. The empirical results support the expectations theory of the term structure for all countries except Malta. By decomposing each term structure into its transitory and permanent components, we also analyse short-run and long-run interdependence among the term structures of interest rates in these countries. Our results indicate only weak linkages among the term structures of the 10 new EU countries and strong linkages between Bulgaria and Romania joined the EU in 2007.

Date: 2008
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DOI: 10.1080/00036840600690249

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