CONVERGENCE AND ANCHORING OF YIELD CURVES IN THE EURO AREA

Refet Gürkaynak, Marcel Fratzscher, Eric Swanson and Michael Ehrmann
Additional contact information
Eric Swanson: FRB San Francisco

No 897, 2009 Meeting Papers from Society for Economic Dynamics

Abstract: We study the convergence of European bond markets and the anchoring of inflation expectations in the euro area using high-frequency bond yield data for France, Germany, Italy, and Spain as well as smaller euro area countries and a control group comprising the UK, Denmark, and Sweden. We find that Economic and Monetary Union (EMU) has led to substantial convergence in euro area sovereign bond markets in terms of interest rate levels, unconditional daily fluctuations, and conditional responses to major macroeconomic announcements. Our findings also suggest a substantial increase in the anchoring of long-term inflation expectations since EMU, particularly for Italy and Spain, which have seen their long-term interest rates become much lower, much less volatile, and much better anchored in response to news. Finally, we present evidence that the elimination of exchange rate risk and the adoption of a common monetary policy were the primary drivers of bond market convergence in the euro area, as opposed to fiscal policy restraint and the loose exchange rate peg of the 1990s.

Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2009/paper_897.pdf (application/pdf)

Related works:
Journal Article: Convergence and Anchoring of Yield Curves in the Euro Area (2011)
Working Paper: Convergence and Anchoring of Yield Curves in the Euro Area (2007)
Working Paper: Convergence and anchoring of yield curves in the euro area (2007)
Working Paper: Convergence and anchoring of yield curves in the Euro area (2007)
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:red:sed009:897

Access Statistics for this paper

More papers in 2009 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().