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International Asset Holdings and the Euro

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  • Pels

    ()
    (Institute for International Integration Studies, Trinity College Dublin)

Abstract

The establishment of a monetary union in Europe in 1999 has eliminated exchange rate risk within the euro area and has led to a more unified financial framework. It has been established in the literature that the euro has led to a disproportional increase in bilateral asset holdings within the euro area. This paper builds on this evidence and answers the question whether this has been a one-off effect, or whether the euro effect in intra-euro area bilateral asset holdings has changed over time. We show, using a gravity framework, that the proportional increase in bilateral asset holdings took place in the early years of the European monetary union and was a unique event. The data used are bilateral data on equity and bond holdings, provided by the Coordinated Portfolio Investment Survey of the IMF for the years 1997, and 2001 until 2006.

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Bibliographic Info

Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp331.

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Length: 27 pages
Date of creation: Jul 2010
Date of revision:
Handle: RePEc:iis:dispap:iiisdp331

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Keywords: international asset trade; gravity equation; euro;

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References

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  1. Coeurdacier, Nicolas & Martin, Philippe, 2006. "The Geography of Asset Trade and the Euro: Insiders and Outsiders," ESSEC Working Papers DR 06020, ESSEC Research Center, ESSEC Business School.
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  8. Gert-Jan M. Linders & Henri L.F. de Groot, 2006. "Estimation of the Gravity Equation in the Presence of Zero Flows," Tinbergen Institute Discussion Papers 06-072/3, Tinbergen Institute.
  9. Mark M. Spiegel, 2004. "Monetary and financial integration: evidence from the EMU," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue aug6.
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Cited by:
  1. Hale, Galina & Obstfeld, Maurice, 2014. "The euro and the geography of international debt flows," Working Paper Series 2014-10, Federal Reserve Bank of San Francisco.
  2. Schmitz, Birgit & von Hagen, Jürgen, 2011. "Current account imbalances and financial integration in the euro area," Journal of International Money and Finance, Elsevier, vol. 30(8), pages 1676-1695.

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