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Monetary integration and the cost of borrowing

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  • Marta Gómez-Puig

Abstract

With the beginning of the European Monetary Union (EMU), euro-area sovereign securities’ adjusted spreads over Germany (corrected from the foreign exchange risk) experienced an increase that caused a lower than expected decline in borrowing costs. The objective of this paper is to study what explains that rising. In particular, if it took place a change in the price assigned by markets to domestic (credit risk and/or market liquidity) or to international risk factors. The empirical evidence supports the idea that a change in the market value of liquidity occurred with the EMU. International and default risk play a smaller role.

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Paper provided by FEDEA in its series Working Papers on International Economics and Finance with number 05-05.

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Handle: RePEc:fda:fdadef:05-05

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Citations

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Cited by:
  1. Marta Gomez-Puig, 2007. "Eu-15 Sovereign Governments Cost Of Borrowing After Seven Years Of Monetary Union," IREA Working Papers, University of Barcelona, Research Institute of Applied Economics 200711, University of Barcelona, Research Institute of Applied Economics, revised May 2007.
  2. Dimitris A. Georgoutsos & Petros Migiakis, 2012. "Heterogeneity of the determinants of euro-area sovereign bond spreads; what does it tell us about financial stability?," Working Papers, Bank of Greece 143, Bank of Greece.
  3. Marta Gómez-Puig & Simón Sosvilla-Rivero, 2014. "“EMU sovereign debt market crisis: Fundamentals-based or pure contagion?”," IREA Working Papers, University of Barcelona, Research Institute of Applied Economics 201402, University of Barcelona, Research Institute of Applied Economics, revised May 2014.
  4. Ludwig , Maximilian, 2013. "Sovereign Borrowing for Dubious Reforms: A model with applications on the EMU," Working Papers 29/2013, Universidade Portucalense, Centro de Investigação em Gestão e Economia (CIGE).
  5. Marta Gómez-Puig, 2005. "The Impact Of Monetary Union On Eu-15 Sovereign Debt Yield Spreads," Working Papers, Asociación Española de Economía y Finanzas Internacionales 05-11, Asociación Española de Economía y Finanzas Internacionales.
  6. Dimitris A. Georgoutsos & Petros Migiakis, 2010. "European sovereign bond spreads: monetary unification, market conditions and financial integration," Working Papers, Bank of Greece 115, Bank of Greece.
  7. Abad, Pilar & Chuliá, Helena & Gómez-Puig, Marta, 2009. "EMU and European government bond market integration," Working Paper Series, European Central Bank 1079, European Central Bank.
  8. Marta Gómez-Puig & Simón Sosvilla-Rivero & María del Carmen Ramos-Herrera, 2014. "An update on emu sovereign yield spread drivers in times of crisis: a panel data analysis," Working Papers, Asociación Española de Economía y Finanzas Internacionales 14-07, Asociación Española de Economía y Finanzas Internacionales.
  9. Dimitris A. Georgoutsos & Petros M. Migiakis, 2009. "Benchmark bonds interactions under regime shifts," Working Papers, Bank of Greece 103, Bank of Greece.
  10. Bernoth, Kerstin & Erdogan, Burcu, 2010. "Sovereign bond yield spreads: a time-varying coefficient approach," Discussion Papers, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics 289, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
  11. Bernoth, Kerstin & Hagen, Jürgen von & Schuknecht, Ludger, 2006. "Sovereign Risk Premiums in the European Government Bond Market," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University 151, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  12. Georges Hübner & Robert Joliet, 2013. "Government Debt Denomination Policies Before and After the EMU Advent," Open Economies Review, Springer, Springer, vol. 24(2), pages 283-309, April.
  13. Gómez-Puig, Marta & Sosvilla-Rivero, Simón, 2013. "Granger-causality in peripheral EMU public debt markets: A dynamic approach," Journal of Banking & Finance, Elsevier, Elsevier, vol. 37(11), pages 4627-4649.

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