For an effective and smooth monetary policy, it is important that interest rate expectations are in line with central bank policy intentions. The predictability of money market interest rates is, therefore, an indicator of transparency and clarity in the communication of monetary policy and of...

This paper provides a study of bond yield differentials among EU eurobonds issued between 1991 and 2002. Interest differentials between bonds issued by EU countries and Germany or the USA contain risk premia which increase with the debt, deficit and debt-service ratio and depend positively on...