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The Euro and International Capital Markets

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Author Info
Detken, Carsten
Hartmann, Philipp

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Abstract

This paper provides a broad empirical examination of the major currencies' roles in international capital markets, with a special emphasis on the first year of the Euro. A contribution is made as to how to measure these roles, both for international financing as well as for international investment. The times series collected for these measures allow for the identification of changes in the role of the Euro during 1999 compared to the aggregate of Euro predecessor currencies, net of intra-Euro area assets/liabilities, before stage 3 of EMU. A number of key factors determining the currency distribution of international portfolio investments, such as relative market liquidity and relative risk characteristics of assets, are also examined empirically. It turns out that for almost all important market segments for which data are available, the Euro immediately became the second most widely used currency for international financing and investment. For the flow of international bond and note issuance it experienced significant growth in 1999 even slightly overtaking the US dollar in the second half of the year. The Euro's international investment role appears more static though, since most of the early external asset supply in Euro is actually absorbed by Euro area residents.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2461.

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Date of creation: May 2000
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Handle: RePEc:cpr:ceprdp:2461

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Related research
Keywords: Bank Lending Bond Markets Capital Flows Dollar EMU Equity Markets Euro International Capital Markets International Currencies International Monetary System Money Markets Portfolio Selection Yen

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Find related papers by JEL classification:
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Elias Papaioannou & Richard Portes & Gregorios Siourounis, 2006. "Optimal Currency Shares in International Reserves: The Impact of the Euro and the Prospects for the Dollar," NBER Working Papers 12333, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Rainer Schweickert, 2001. "Assessing the Advantages of EMU-Enlargement for the EU and the Accession Countries: A Comparative Indicator Approach," Kiel Working Papers 1080, Kiel Institute for the World Economy. [Downloadable!]
  3. Michele Manna & Philipp Hartmann & Andres Manzanares, 2001. "The microstructure of the Euro money market," Working Paper Series 080, European Central Bank. [Downloadable!]
    Other versions:
  4. Menzie D. Chinn & Jeffrey A. Frankel, 2008. "The Euro May Over the Next 15 Years Surpass the Dollar as Leading International Currency," NBER Working Papers 13909, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Michel Beine & Charles S. Bos & Sebastian Laurent, 2005. "The Impact of Central Bank FX Interventions on Currency Components," Tinbergen Institute Discussion Papers 05-103/4, Tinbergen Institute. [Downloadable!]
    Other versions:
  6. Javier Santillán & Marc Bayle & Christian Thygesen, 2000. "The impact of the euro on money and bond markets," Occasional Paper Series 1, European Central Bank. [Downloadable!]
  7. Liliane Karlinger, 2002. "The Impact of Common Currencies on Financial Markets: A Literature Review and Evidence from the Euro Area," Working Papers 02-35, Bank of Canada. [Downloadable!]
  8. Söehnke Bartram & Stephen Taylor & Yaw-Huei Wang, 2004. "The Euro and European Financial Market Integration," Money Macro and Finance (MMF) Research Group Conference 2004 49, Money Macro and Finance Research Group, revised 13 Oct 2004. [Downloadable!]
  9. Guy Meredith, 2001. "Why Has the Euro Been So Weak?," IMF Working Papers 01/155, International Monetary Fund. [Downloadable!]
  10. Michael G. Kollo, 2005. "Underwriter competition and gross spreads in the eurobond market," Working Paper Series 550, European Central Bank. [Downloadable!]
  11. Portes, Richard, 2001. "The Euro and the International Financial System," CEPR Discussion Papers 2955, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  12. Menzie Chinn & Jeffrey Frankel, 2005. "Will the Euro Eventually Surpass the Dollar as Leading International Reserve Currency?," NBER Working Papers 11510, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  13. Marco Pagano & Ernst-Ludwig von Thadden, 2004. "The European Bond Markets under EMU," CSEF Working Papers 126, Centre for Studies in Economics and Finance (CSEF), University of Salerno, Italy. [Downloadable!]
    Other versions:
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