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RIP and the shift toward a monetary union: Looking for a “euro effect” by a structural break analysis with panel data |
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| Authors: | Samuel Maveyraud-Tricoire Philippe Rous |
| Institution: | 1. University of Wisconsin — Whitewater, Department of Economics, 800 W. Main Street, Whitewater, WI 53190, United States;2. USDA-NASS, Research and Development Division, 3251 Old Lee Highway, Fairfax, VA 22030, United States;3. The Ohio State University, Dept. of Ag., Env., and Dev. Economics, 2120 Fyffe Road, Columbus, OH 43210, United States;4. The Ohio State University, Dept. of Chem. and Biom. Engineering, 140 West Nineteenth Avenue, Columbus, OH 43210, United States;1. Department of Economics, Hacettepe Univeristy, 06800 Beytepe, Ankara, Turkey;2. Department of Banking and Finance, Okan Univeristy, Tuzla Kampusu, 34959, Akf?rat, Tuzla, Istanbul, Turkey |
| Abstract: | This paper aims to evaluate how the ex ante real interest rates of Euro area countries have been modified by the introduction of the euro. We use cointegration analysis with endogenous breaks in a panel data context. Our results show that the “euro effect” is significant in our sample and that after the introduction of the euro, the real interest parity (RIP) holds. This last conclusion is due to a decrease in the nominal interest rate differentials rather than to a reduction in goods and services price differentials and in the exchange rate volatility. |
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