Asymmetry in the Long-Run Interest Rate Spillovers on the Monetary Policy of EU Countries Outside the E Mu

We aim to analyze empirically the long-run interest rate spillovers on the monetary policy of European countries outside the EMU. The analysis covered years from October 1998 to December 2021 and was based on the VEC model and UIP parity, which allowed us to check the potential cointegration of the three-month interest rates in the interbank markets of seven European non-EMU economies and their euro area counterpart. We find a significant asymmetry in this relation. The results showed that such long-run relation occurs in the case of Denmark, Sweden, Poland, and Romania, which means that the costs of accession resulting from the loss of the national central bank's independence would not be high in these economies. However, for the Czech Republic and Hungary, this cost would probably be significant. As expected, the interest rates of other countries asymmetrically do not affect ECB rates at all