چه اتفاقی در حوزه روابط بازار سرمایه اقیانوس اطلس افتاده است؟

This paper investigates the capital market relations between Euroland and the USA from 1990 until 2006. The UIP-implied long-run relation between European and US government bond yields is shown breaking down in the mid-1990s. However, contrasting with conventional theory, a stationary equilibrium exists additionally including the exchange rate. The reason proves to be a stochastic trend common to the European interest and the euro/dollar rate, which is explained by central bank reactions and unfinished learning processes on the role of the euro. Furthermore, the paper demonstrates a striking reduction in the US capital market dominance, leading to transatlantic interdependence at eye level.

In the year 1999 eleven member states of the European Union (EU) joined to create the euro, a common currency dedicated to foster economic growth and integration in its area. In the course of the European integration process, this step marks the final stage in the historic formation of the European Economic and Monetary Union (EMU). Nevertheless, the first years saw non-trivial currency depreciation, giving grounds to discussions about the stability of the euro and its strength in international comparison. Meanwhile, the situation has changed, and concerns in Europe are rather directed to threatened export competitiveness. In this context, one crucial question refers to the role of the euro area assets in international capital markets. On the one hand, the long-term interest rate, which is crucial for determining investment, is expected to react with respect to the domestic business cycle situation and monetary policy impulses. On the other hand, arbitrage between bonds denominated in different currencies, as stated by the uncovered interest rate parity (UIP), as well as exchange rate developments bring in foreign influences. The degree of internal autonomy a country can preserve apparently depends on its strength in international relations. This constellation makes capital market leadership to be a key factor for the interaction between financial sector and real economy. Although the literature on international interest rate connections is well elaborated, analyses including EMU data remain relatively scarce. Up until now, for example Wolters, 2002, Ehrmann and Fratzscher, 2002, Ehrmann and Fratzscher, 2004 and Chinn and Frankel, 2003 as well as Brüggemann and Lütkepohl (2005) have considered interest rate relations between Europe and the US. As a main result, predominantly the European markets have been found depending on US influences, while reverse effects gained little significance. The present approach demonstrates an intriguing change in this pattern, which takes place since the mid-1990s and thus noticeably coincides with the third stage of EMU. A furthermore important contribution of this paper lies in providing insight into the distinct role of the exchange rate in capital markets, since a remarkable development has taken place in the run-up to the euro introduction: Bivariate cointegration between the European and US bond yields confirms a necessary condition for validity of the classical UIP theory in samples beginning in the early 1990s. Thereafter though, a long-run equilibrium does not survive without including the euro/dollar exchange rate, which bears a positive sign. The reason turns out to be a systematic reaction of the European interest rate to exchange rate fluctuations, introducing a second stochastic trend into the system. Subsequent economic argumentation suggests that this phenomenon can be straightforwardly explained by monetary policy reactions of the European Central Bank (ECB) and still unfinished learning processes in the foreign exchange market concerning the role of the new European currency. Furthermore, despite the positive long-run relation between interest and exchange rate, the model features the common sense negative (i.e., appreciating) effects of yield-induced capital flows. In terms of empirical methodology, I mainly employ multivariate time series analysis based on the notion of cointegration. The central estimations are carried out in vector error correction models (VECMs), where formally, I follow the procedure proposed by Johansen (1995). This allows for testing UIP validity, establishing long-run relations and analysing the adjustment to equilibrium deviations, which reflects the "balance of power" in the transatlantic relations. Furthermore, in order to shed light on changes and development of these relations, I apply the econometric tools within a backward recursive calculation scheme. The underlying paper is organised as follows: Section 2 introduces the theoretical concept of the UIP, supplemented by the above-mentioned innovative considerations on the role of the exchange rate. Subsequently, I describe the econometric methodology, mainly the test and estimation procedures. Section 4 presents the various empirical results of the VECM estimations. In the end, a summary displays all relevant generalised interpretation of the findings and concludes the paper.

Starting out to shed light on the capital market connection between the euro area and the US, this paper concentrates on the long-run UIP-based interest rate equilibrium. At first, backward recursive estimations can establish cointegration between the government bond yields, but since the mid-1990s, classical UIP does not prove valid anymore. A stable long-run relation can however be found when including the exchange rate in a trivariate VECM. This stands in contrast to conventional UIP theory, which rules out any level relation between interest and exchange rates. Furthermore, the positive long-run link between the European–US interest differential and the euro/dollar rate seemingly casts doubt on the economic sense of the empirical outcome. Nevertheless, further econometric results favour the view that besides the stochastic UIP trend, another non-stationary component is shared by the European bond yield and the exchange rate. Since the mid-1990s, a strong positive reaction of the European interest rate to exchange rate movements underlines this connection. Central bank behaviour aiming at stabilising the European currency comes as a straightforward explanation. Another plausible reason for the above-mentioned positive link stems from the learning of markets on the role of the new European currency. Anyhow, the reverse influence of the interest differential on the euro/dollar rate is still negative, what is in line with common sense theory. An interesting task for future research would be a more detailed investigation of the two theoretical scenarios, in order to provide additional evidence on their empirical relevance. Having explored the unusual role of the exchange rate, the study addresses the important question of economic leadership: At first, expected US dominance is found, since it is the European bond yield adjusting to re-equilibrate the capital market. After the early 1990s however, the feedback effects from the European side reach the same strength as the original US influence. Consistent with fore standing reasoning, it can be suggested that the European unification with the completion of the monetary union has contributed to the change. In detail, it may have arisen from the lower sensitivity to foreign influences of the monetary union as a whole. For the same reason, the strategic position of one united European central bank has improved in comparison with the US, where since then, a single European interest rate could be observed. A further source of the shift could be given by the ongoing integration of financial markets. American weaknesses like the current account and budget deficits might have played an additional role. For the European economy, the new situation means both exposure to the world markets as well as a certain scope for domestic policy, and therefore accordant responsibility as one of the world's strongest economic powers. Above all, the European monetary policy should be aware of this constellation. The US economy still holds on to the leading position, but this might be questioned by the European unification, of course in addition to the Asian economic miracle.