cubierta_DT 2007_18

PublicationWorking Papers

Los procesos de convergencia financiera en Europa y su relación con el ciclo económico

Social Sciences > Economics > Public Economics

This working paper studies the convergence process in financial markets and its relation with the business cycle in 15 economies of the European Union. We use unobserved component models and a regression model. The regression model defines convergence as the discrepancy between two variables conveniently defined. The considered variables are the interest rates of the public debt (ten-year rates, in nominal and real terms), the slope of the term structure (ten-year minus three months) and the rates of return in the stockmarket.

We find a convergence process for the interest rates and the term spread before the third quarter of 1998. After this, there is integration in the ten-year nominal rates and the term spread, but not in the real rates; they evolve in a band with constant dispersion. The rates of return in the stock market do not integrate, though they move within a band of constant variance. The GDP in the studied countries only has a positive influence over the convergence process for the nominal rates.