Lessons from Nominal Convergence in Slovenia

Abstract

Two years after joining the ERM2 mechanism Slovenia had fulfilled the legal requirements for joining EMU as well as the Maastricht criteria. This article analyses how the path to EMU affected Slovenian nominal convergence, more specifically yield spread movements for standardised maturities. For that purpose daily Slovenian yield curves were estimated in the period after introduction of the OTC–DVP market. The results show that yield spreads between the Slovenian and the generic EMU government yield curves decreased significantly at the beginning of March 2006 when Slovenia requested individual appraisal of EMU criteria fulfilment. Yield spreads decreased further in July 2006 when the definite fixed exchange rate was set.

Notes

¹ See Favero, Giavazzi & Spaventa (1996) for an evaluation of the determinants of the total yield spreads among EU member high yielders.

Additional information

Notes on contributors

Andraž Grum

Dr Andraž Grum, IFIN, Institute of Finance, Ulica Jožeta Jame 14, SI-1000 Ljubljana, [email protected]