Interest rate convergence in the Baltic countries of Latvia, Lithuania and Estonia

Abstract

For the three Baltic countries we find foreign interest rates a more important determinant of domestic interest rates than domestic inflation.

Acknowledgement

We are indebted to Yongcheol Shin for clarifying aspects of the Pesaran, Shin and Smith procedure.

Notes

¹ Prior to 1998 the rate reported for Lithuania was for interbank credit for periods up to one month.

² Eurocurrency rates from Datastream. The euromark designation was not changed by Datastream after the introduction of the Euro.