Financial Markets' Assessment of EMU

David S. Bates

No 6874, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This article reviews the assumptions and methodologies underlying EMU probability calculators,' which infer from financial data the probability of specific countries joining the European Monetary Union. Some historical evidence is presented in support of the expectations hypothesis for intra-European interest rate differentials underlying most calculators, while various potential biases are deemed negligible. The various EMU calculators differ primarily in their scenarios for intra-European interest rate differentials conditional upon EMU not occurring. This article also discusses what can be inferred from financial data regarding future policies of the European Central Bank.

JEL-codes: F36 (search for similar items in EconPapers)
Date: 1999-01
New Economics Papers: this item is included in nep-eec
Note: IFM
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Citations: View citations in EconPapers (8)

Published as Carnegie-Rochester Conference Series on Public Policy, Vol. 51, no. 1(1999): 229-269.

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