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Article
EUROPEAN INTEGRATION AND INTEREST RATE TRANSMISSION IN EU: AN EXCHANGE RATE REGIMES' APPROACH
Bogdan Capraru, Vasile Cocris, Iulian Ihnatov
ABSTRACT. This paper analyses the consequences of European integration on the interest rates pass-through from the Eurozone to the non-Euro countries that are the members of the European Union. The methodology of Frankel et al. (2004) is used in order to test the degree of monetary policy autonomy of the non-Euro European Union countries versus the European Central Bank policy, in a framework of different exchange rate regimes. The research is performed for 1999-2010 period on the EU27 non-Euro countries, including the pre-adoption data for those which adopted Euro during this period. According to the obtained results, the Euro area interest rates pass-through to the non-Euro EU countries reveals the differences by country groups and exchange rate regimes .
KEYWORDS: exchange rate regime, monetary policy independence hypothesis, interest rate transmission, European integration, impossible trinity.
JEL classification: F31, F32, F33, F36.