This Economic Letter takes a closer look at the effect of European Economic and Monetary Union (EMU) on long-term government bond yields in the four largest euro zone countries: France, Germany, Italy, and Spain.

Understanding long-term interest rate fluctuations requires one to understand what the term premium is and how it may change over time. In this Economic Letter, we define the term premium and explain the state of the art in measuring it. We conclude with some discussion of the limitations of our...