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The Emergence and Innovations of the Eurodollar Money and Bond Market: The Role of Openness and Competition Between States

In: Explaining Monetary and Financial Innovation

Author

Listed:
  • Torsten Saadma

    (University of Mannheim)

  • Roland Vaubel

    (University of Mannheim)

Abstract

The emergence of the Eurodollar market for deposits, loans and bonds is a major example of a monetary and financial innovation that was driven by competition between two financial centres, their regulators and their governments. The Eurodollar money market is of particular interest because the incumbent tried to engage the innovator in a regulatory and tax cartel. When this attempt failed, she decided to imitate the challenger's innovations. The Eurodollar money market was invented by the British banks and the Bank of England, the Eurodollar bond market also by the British government. In the US, the Federal Reserve and Democratic administrations tried to suppress competition from the Eurodollar market while Republican administrations and Wall Street tended to accept the challenge from London. The Fed's restrictive stance was independent of whether its Governor had been nominated by a Republican or a Democratic President. .

Suggested Citation

  • Torsten Saadma & Roland Vaubel, 2014. "The Emergence and Innovations of the Eurodollar Money and Bond Market: The Role of Openness and Competition Between States," Financial and Monetary Policy Studies, in: Peter Bernholz & Roland Vaubel (ed.), Explaining Monetary and Financial Innovation, edition 127, pages 323-366, Springer.
    • Handle: RePEc:spr:fimchp:978-3-319-06109-2_13
    DOI: 10.1007/978-3-319-06109-2_13
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    Cited by:

    1. Zhaosu MENG & Kedong YIN & Yan ZHANG & Xun DONG, 2017. "The Risk Contagion Effect of Return Volatility between China’s Offshore and Onshore Foreign Exchange Market," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 5-21, December.

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