What happened to the transatlantic capital market relations?

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." (Author's abstract, IAB-Doku) ((en))

Cite article

Weber, E. (2011): What happened to the transatlantic capital market relations? In: Economic Modelling, Vol. 28, No. 3, p. 877-884. DOI:10.1016/j.econmod.2010.10.017