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The Real Effects of the Euro: Evidence from Corporate Investments

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Author Info
Bris, Arturo
Koskinen, Yrjö
Nilsson, Mattias
Abstract

Existing evidence shows that the Economic and Monetary Union (EMU) has reduced the cost of capital for firms in the euro area. We study the impact of the adoption of the euro in January 1999 by 11 countries in Europe on the firms’ investment rates, and show that the investment results are consistent with reduction in cost of capital. Using corporate data from the 11 EMU countries, as well as from a control sample of 5 non-EMU, European countries, our paper shows that: (i) investments for EMU-firms have grown 2.5% more than for non-EMU firms, after 1999; and (ii) the benefits of the euro accrue especially to small, domestic firms from countries with previously weak currencies.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4521.

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Date of creation: Aug 2004
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Handle: RePEc:cpr:ceprdp:4521

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Related research
Keywords: cost of capital currency union Economic and Monetary Union (EMU) investments the euro

Find related papers by JEL classification:
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure

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