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Brief Empirics Of Interest - Rate Differential In Macedonia

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  • Marjan Petreski

    (Lecturer of Econometrics and International finance University of American College - Skopje)

Abstract

The aim of this paper is to empirically test the order of integration of the differential of the referent interest rates in Macedonia and Euro zone, in order to confirm or reject the hypothesis of interest-rate convergence in Macedonia. Namely, the strategy of exchange-rate pegging puts monetary policy on an autopilot which immediately shrinks domestic inflation at Euro zone's level, but is expected to lead to interest-rates convergence too. We utilize three less-known tests in the literature of series' integration: KPSS, Geweke and Porter-Hudak test and Robinson test and we find support for the hypothesis that interest rates are in a process of catching up, which implies that their integration level is about 0.87, hence confirming that the convergence is not yet achieved, but is underway.

Suggested Citation

  • Marjan Petreski, 2009. "Brief Empirics Of Interest - Rate Differential In Macedonia," Journal Articles, Center For Economic Analyses, pages 5-11, June.
    • Handle: RePEc:cmk:journl:y:2009:p:5-11
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    References listed on IDEAS

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    More about this item

    Keywords

    interest-rate convergence; tests for fractional integration;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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