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EMU Countries (emu + country)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	66%

Selected Abstracts

Convergence within the EU: Evidence from Interest Rates

ECONOMIC NOTES, Issue 2 2000
Teresa Corzo Santamaria
The economic and political changes which are taking place in Europe affect interest rates. This paper develops a two-factor model for the term structure of interest rates specially designed to apply to EMU countries. In addition to the participant country's short-term interest rate, we include as a second factor a ,European' short-term interest rate. We assume that the ,European' rate follows a mean reverting process. The domestic interest rate also follows a mean reverting process, but its convergence is to a stochastic mean which is identified with the ,European' rate. Closed-form solutions for prices of zero coupon discount bonds and options on these bonds are provided. A special feature of the model is that both the domestic and the European interest rate risks are priced. We also discuss an empirical estimation focusing on the Spanish bond market. The ,European' rate is proxied by the ecu's interest rate. Through a comparison of the performance of our convergence model with a Vasicek model for the Spanish bond market, we show that our model provides a better fit both in-sample and out-of sample and that the difference in performance between the models is greater the longer the maturity of the bonds. (J.E.L.: E43, C510). [source]

Financial Integration and EMU

EUROPEAN FINANCIAL MANAGEMENT, Issue 1 2005
Franklin Allen
G21; G34; F23 Abstract This paper investigates the effect of European Monetary Union on the integration of the financial services industry within European using data on the announcements of M&A's within the industry. We find some evidence that EMU has helped financial integration within the euro area. In addition, financial institutions in EMU countries became more active in initiating integration between EMU and non-EMU partners, which also contributed to overall regional integration within European. The more active role of EMU institutions suggests that institutions residing in the eurozone became stronger players in the corporate control market. However, EMU does not facilitate the entry of non-European institutions into European. [source]

Monetary and Fiscal Policy Rules in the EMU

GERMAN ECONOMIC REVIEW, Issue 4 2004
Bas Van Aarle
EMU; fiscal policy; monetary policy Abstract. This paper studies the design and effects of monetary and fiscal policy in the euro area. To do so, a stylized two-region model of monetary and fiscal policy rules in the EMU is built. We analyse how monetary and fiscal rules affect the adjustment dynamics in the model. Both the effects on the individual countries and on the EMU aggregate economy are studied. Three aspects play an important role in the analysis: (i) the consequences of alternative monetary and fiscal policy rules, (ii) the consequences of asymmetries between EMU countries (asymmetries in macroeconomic shocks and macroeconomic structures), and (iii) the role of alternative degrees of backward- and forward-looking behaviour in consumer decisions and inflation expectations. [source]

Assessing monetary rules performance across EMU countries

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 2 2003
Carlo Altavilla
Abstract The topic covered in this paper is the performance of different monetary policy rules used as guidelines in practical policy making. To this end, different rules are evaluated using alternative econometrics techniques. A comparative analysis is made of the ability of the rules to correspond to the historical central bank behaviour and of the volatility of output, inflation and interest rate changes that they imply. The study is conducted of the EMU countries. The results suggest that simple rules perform quite well and that the advantages obtained from adopting an optimal control-based rule are not so great. Moreover, the addition of a forward-looking dimension and of an interest rate smoothing term in the reaction function seems to improve the performance of the rules. Copyright © 2003 John Wiley & Sons, Ltd. [source]

How to Cut the Seigniorage Cake into Fair Shares in an Enlarged EMU

JCMS: JOURNAL OF COMMON MARKET STUDIES, Issue 5 2007
JØRGEN DRUD HANSEN
The European Central Bank redistributes each year seigniorage from issuing euro notes to the National Central Banks of the euro countries. The key for this redistribution is, from 2008, based on the respective GDP and population proportions of the euro countries. Applying the distribution formula to the new EU countries from central and eastern Europe seems to give these countries a large net benefit compared with the seigniorage they bring in, i.e. their share of currency in circulation. However, as argued in this article, currency demand in the new EU member countries is expected to increase relative to the present group of euro countries , especially after gaining membership in the EMU because of integration of the financial markets and, in the longer term, catching-up growth. Hence, it is doubtful whether a large unintended redistribution of seigniorage to the benefit of acceding EMU countries will materialize in the future. [source]

Have Business Cycles Become More Synchronized?

JCMS: JOURNAL OF COMMON MARKET STUDIES, Issue 1 2002
Jakob De Haan
Will further integration make business cycles in EMU countries more similar? This article answers the question by analysing to what extent business cycles in US and German states have become more synchronized and by examining whether synchronization in OECD countries is affected by trade intensity and exchange rate stability. Using long-run data for the US we find only mixed evidence for synchronization. However, post-war data for Germany suggest that business cycles behave more similarly over time. The evidence for OECD countries is mixed: trade intensity has led to more, and exchange rate stability to less, synchronization. [source]

THE RELATIONSHIP BETWEEN CAPITAL STOCK, UNEMPLOYMENT AND WAGES IN NINE EMU COUNTRIES

BULLETIN OF ECONOMIC RESEARCH, Issue 2 2007
Philip Arestis
E00; E22; E24 ABSTRACT The focus of this paper is to investigate the importance of the capital stock in the determination of wages and unemployment in a range of EMU countries and to compare the results across countries. A time-series analysis is conducted in the case of nine euro area countries, which were selected solely on the basis of data availability and consistency: Austria, Belgium, Finland, France, Germany, Italy, Ireland, the Netherlands and Spain. The paper begins with a short review of the literature on capital stock and unemployment, before it deals with the theoretical model. This is followed by estimation and testing of the theoretical model put forward, using both time-series and panel data. The results are supportive of the main hypothesis of the paper: capital stock is an important determinant of unemployment and wages in the countries considered for the purposes of the paper. [source]

Are There Differences Across Countries Regarding the Effect of Currency Unions on Trade?

JCMS: JOURNAL OF COMMON MARKET STUDIES, Issue 1 2006
Evidence from EMU
This article investigates the effect of EMU on the bilateral trade of each EMU country with the rest of the euro area using pooled data in the context of an augmented gravity model. Using the fixed effect in the pooled data, the empirical results indicate that EMU's effect on trade differs across euro area countries. For Belgium/Luxembourg, Finland, Germany, Ireland, the Netherlands, Portugal and Spain the effect is positive and statistically significant, whereas in the cases of Austria, France and Greece, it is negative and statistically significant. For Italy, EMU's effect on its trade with the rest of the euro area is positive but not statistically significant. [source]