Revisiting Covered Interest Parity in the European Union: the DCCA Approach

This paper analyzes the evidence of financial integration, with covered interest parity (CIP), for a group of countries that have already adopted the euro and another group of countries that kept their currencies. We use detrended cross-correlation analysis, which allows analyzing the behavior of time series even when they are not stationary. The main results indicate that countries that adopted the euro do not show much evidence in favor of CIP, before joining the Eurozone, which could imply they will not benefit from all common currency advantages. In the group of countries that did not adopt the euro, Denmark, Sweden, the UK and the Czech Republic are the ones presenting better conditions for financial integration with the euro, while Bulgaria has also some evidence of this. Some possible explanations of CIP deviations are agents not considering all countries’ assets as similar and also the underdevelopment of markets and liquidity problems (more pronounced due to periods of turmoil).     

The Economics of Social Interactions: An Interdisciplinary Ground for Social Scientists?

Social interaction models, i.e. the changing sequence of actions between individuals who modify their behavior under the influence of their peers, have rarely enjoyed as high a profile in economic analysis as they do today. However, the literature growth has not been accompanied by a process of academic consolidation. The difficulties encountered in research are largely but not entirely the result of data constraints. The main argument of this article is that the source of problems may be traceable to the lack of a complementary approach between economics and other disciplines. The difficulties presented by the deficit in academic exchange among social scientists are compounded by the current analytical framework, which still concentrates on the fundamental, but mutually exclusive, traditions of thought: homo oeconomicus and homo sociologicus. In spotlighting these ideas, this article reviews the economic body of literature on social interactions and their effect on individual unemployment status. Two directions in current research are analyzed: the impact of social (work) norms on unemployment and the role of social networks in the job search process. The theoretical and methodological challenges encountered in research suggest that the future of social interactions models might be found at the crossroads of economics and other social sciences.