Affordable Access

What happened to the transatlantic capital market relations?

Authors
Disciplines
  • Economics
  • Mathematics
  • Political Science

Abstract

This paper investigates the capital market relations between Euroland and the USA from 1990 until 2006. The UIP-implied long-run relation between European and US government bond yields is shown breaking down in the mid-1990s. However, contrasting with conventional theory, a stationary equilibrium exists additionally including the exchange rate. The reason proves to be a stochastic trend common to the European interest and the euro/dollar rate, which is explained by central bank reactions and unfinished learning processes on the role of the euro. Furthermore, the paper demonstrates a striking reduction in the US capital market dominance, leading to transatlantic interdependence at eye level.

There are no comments yet on this publication. Be the first to share your thoughts.

Statistics

Seen <100 times
0 Comments