Using information contained in forward interest rates, this paper attempts to assess the probability that European Monetary Union (EMU) occurs and that a particular country participates. It is shown that since the Madrid summit, the public has become increasingly optimistic about the realization...

This paper reassesses the Fisher effect using German data. It argues that the empirical rejection of the Fisher effect in previous studies, i.e., the finding of nominal interest rates not fully adjusting to changes in inflation, may be attributed to the particular time series behavior of...

Discount rate changes always receive considerable attention in financial markets and a bulk of empirical papers shows that asset markets react to them. However, among researchers, there is no consensus yet about why markets respond to such changes. This paper analyses this issue for the...

It is commonly found in empirical studies that nominal interest rates contain a unit root, implying that these variables have a permanent memory. One of the characteristics of a nonstationary time series is that it has no tendency to return to its mean values, meaning that the series is trending...