Who is ruling Europe? Empirical evidence on the German dominance hypothesis

Mariam Camarero; Javier Ordóñez

doi:10.1007/s001810100075

Who is ruling Europe? Empirical evidence on the German dominance hypothesis

Mariam Camarero, Javier Ordóñez

Department of Economics

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5 Citations (SciVal)

Abstract

The aim of this paper is to analyze the hypothesis of German dominance in the European Monetary System (EMS). For this purpose, we use monthly interest rates for nine European countries from January 1979 to the second half of 1997. In particular, we test the stability of the implied long-run relationships to assess whether there has been a significant change in the EMS performance. The econometric methodology is based on Johansen's maximum likelihood procedure and several tests for parameter instability. The most important finding is that, although Germany has a significant influence on the monetary policy of the other European countries, it is not possible to accept the existence of dominance.

Original language	English
Pages (from-to)	623-650
Number of pages	28
Journal	Empirical Economics
Volume	26
Issue number	4
DOIs	https://doi.org/10.1007/s001810100075
Publication status	Published - 2001

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abstract = "The aim of this paper is to analyze the hypothesis of German dominance in the European Monetary System (EMS). For this purpose, we use monthly interest rates for nine European countries from January 1979 to the second half of 1997. In particular, we test the stability of the implied long-run relationships to assess whether there has been a significant change in the EMS performance. The econometric methodology is based on Johansen's maximum likelihood procedure and several tests for parameter instability. The most important finding is that, although Germany has a significant influence on the monetary policy of the other European countries, it is not possible to accept the existence of dominance.",

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AB - The aim of this paper is to analyze the hypothesis of German dominance in the European Monetary System (EMS). For this purpose, we use monthly interest rates for nine European countries from January 1979 to the second half of 1997. In particular, we test the stability of the implied long-run relationships to assess whether there has been a significant change in the EMS performance. The econometric methodology is based on Johansen's maximum likelihood procedure and several tests for parameter instability. The most important finding is that, although Germany has a significant influence on the monetary policy of the other European countries, it is not possible to accept the existence of dominance.

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Who is ruling Europe? Empirical evidence on the German dominance hypothesis

Abstract

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