The term structure of interest rates in the economic and monetary union
β Scribed by Luisa Izzi; Borjana Racheva
- Publisher
- Springer
- Year
- 2002
- Tongue
- English
- Weight
- 671 KB
- Volume
- 55
- Category
- Article
- ISSN
- 0340-9422
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π SIMILAR VOLUMES
In this paper we examine the relationship between the term structure of interest rates for six major European Union countries, to discover if the Exchange Rate Mechanism has lead to a converging of domestic term structures. We test this hypothesis using a model of international interest rate parity
The expectations hypothesis implies that the yield curve provides information on the future change in the short-term interest rate. However, transaction costs exist in the ΓΏnancial market, which prevent investors from realizing the arbitrage opportunity, when the arbitrage does not fully cover the t