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The Price Approach to Financial Integration: Decomposing European Money Market Interest Rate Differentials
Lemmen, Jan J. G. | Eijffinger, Sylvester C. W.
Credit and Capital Markets – Kredit und Kapital, Vol. 29 (1996), Iss. 2 : pp. 189–223
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Jan J. G. Lemmen, Tilburg
Sylvester C. W. Eijffinger, Tilburg
Cited By
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Financial market integration in Europe: on the effects of EMU on stock markets
Fratzscher, Marcel
International Journal of Finance & Economics, Vol. 7 (2002), Iss. 3 P.165
https://doi.org/10.1002/ijfe.187 [Citations: 225]
References
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Abstract
The present paper deals with a theoretical and empirical analysis of money market integration in the European Community. The paper examines the degree money market integration between ten EC member states and Germany since the start of the European Monetary System in March 1979. Money market integration is defined as the ability and willingness to move money market assets across national borders. The empirical analysis relies on calculations of mean deviations from covered interest parity, ex post uncovered interest parity and ex post real interest parity. The degree of money market integration crucially depends on the devaluation risk as measured by the ex post exchange risk premium. In the case of Portugal and Greece also capital controls matter.