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Currency composition of international bonds: The EMU effect


  • Hale, Galina B.
  • Spiegel, Mark M.


We analyze the impact that the launch of the EMU had on the currency denomination of private international bond issues in 1990–2006 using micro-level data. Our stylized model predicts that the introduction of the euro would lead to an increase in the share of euro-denominated debt and a decline in the share of dollar-denominated debt issued by firms located in countries outside both the United States and the euro area. Moreover, our model predicts that the euro effect would be particularly pronounced for nonfinancial firms. Our empirical results are consistent with these predictions. In addition, we find that among nonfinancial firms, the impact on new issuers is larger than on seasoned issuers. Extending the model to allow for differences in issuance volumes across future monetary union countries prior to integration, we also predict larger increases in euro-denominated issuance among firms from smaller monetary union countries. We confirm this prediction for international bond issues by euro-area firms.

Suggested Citation

  • Hale, Galina B. & Spiegel, Mark M., 2012. "Currency composition of international bonds: The EMU effect," Journal of International Economics, Elsevier, vol. 88(1), pages 134-149.
  • Handle: RePEc:eee:inecon:v:88:y:2012:i:1:p:134-149 DOI: 10.1016/j.jinteco.2012.01.014

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    References listed on IDEAS

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    Cited by:

    1. John D. Burger & Francis E. Warnock & Veronica Cacdac Warnock, 2017. "Currency Matters: Analyzing International Bond Portfolios," NBER Working Papers 23175, National Bureau of Economic Research, Inc.
    2. Böninghausen, Benjamin & Zabel, Michael, 2013. "Credit Ratings and Cross-Border Bond Market Spillovers," Discussion Papers in Economics 21075, University of Munich, Department of Economics.
    3. Böninghausen, Benjamin & Zabel, Michael, 2015. "Credit ratings and cross-border bond market spillovers," Working Paper Series 1831, European Central Bank.
    4. Böninghausen, Benjamin & Zabel, Michael, 2015. "Credit ratings and cross-border bond market spillovers," Journal of International Money and Finance, Elsevier, vol. 53(C), pages 115-136.
    5. Paul Mizen & Frank Packer & Eli Remolona & Serafeim Tsoukas, "undated". "Why do firms issue abroad? Lessons from onshore and offshore corporate bond finance in Asian emerging markets," Discussion Papers 12/15, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    6. Signe Krogstrup & Cedric Tille, 2015. "On the roles of different foreign currencies in European bank lending," IHEID Working Papers 17-2015, Economics Section, The Graduate Institute of International Studies, revised 31 Aug 2015.
    7. Hale, Galina & Jones, Peter & Spiegel, Mark M., 2014. "The Rise in Home Currency Issuance," Working Paper Series 2014-19, Federal Reserve Bank of San Francisco, revised 04 May 2016.
    8. Hornuf, Lars & Engert, Andreas, 2013. "Can Network Effects Impede Optimal Contracting in Debt Securities?," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79867, Verein für Socialpolitik / German Economic Association.

    More about this item


    Bond markets; Monetary union; Currency risk; Original sin; Liquidity;

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration


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