This paper uses cointegration and common trends techniques to investigate empirically the
expectations hypothesis of the term structure of interest rates for the 10 new EU countries, along
with Bulgaria and Romania. The empirical results support the expectations theory of the term
structure for all countries except Malta. By decomposing each term structure into its transitory
and permanent components, we also analyze short run and long run interdependence among the
term structures of interest rates in these countries. Our results indicate weak linkages among the
term structures of the 10 new EU countries, and strong linkages between Bulgaria and Romania
that hope to join the EU in 2007.
30/11/2004
myEcon Newsletter
Join the notification list of the Department of Economics.