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The Euro and European financial markets

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  • Robert N. McCauley
  • William R. White

Abstract

This study argues that the introduction of the euro would have a more immediate and direct impact on European bond markets than on European banking markets. The single currency would create a single private yield curve in the near term and could also lead to a more integrated government bond market. While the immediate impact of the euro for banking markets would be limited, the switch over time by European corporations from bank debt to bond debt would come on top of the competitive challenge that European banks already face. The need for banks to adjust raises a number of potential issues for public policy in Europe, some of which may have broader international implications.

Suggested Citation

  • Robert N. McCauley & William R. White, 1997. "The Euro and European financial markets," BIS Working Papers 41, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:41
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    References listed on IDEAS

    as
    1. Steven A. Zimmer & Robert N. McCauley, 1990. "Bank cost of capital and international competition," Quarterly Review, Federal Reserve Bank of New York, issue Win, pages 33-59.
    2. Barry Eichengreen and Jurgen von Hagen., 1995. "Fiscal Policy and Monetary Union: Federalism, Fiscal Restrictions and the No-Bailout Rule," Center for International and Development Economics Research (CIDER) Working Papers C95-056, University of California at Berkeley.
    3. De Grauwe, Paul, 1996. "Forward Interest Rates as Predictors of EMU," CEPR Discussion Papers 1395, C.E.P.R. Discussion Papers.
    4. Robert N. McCauley & Rama Seth, 1992. "Foreign bank credit to U.S. corporations: the implications of offshore loans," Quarterly Review, Federal Reserve Bank of New York, issue Spr, pages 52-65.
    5. Gual, Jordi & Neven, Damien J, 1992. "Deregulation of the European Banking Industry (1980-1991)," CEPR Discussion Papers 703, C.E.P.R. Discussion Papers.
    6. McCauley, R.N., 1997. "The Euro and the Dollar," Princeton Essays in International Economics 205, International Economics Section, Departement of Economics Princeton University,.
    7. Richard Cantor & Frank Packer, 1996. "Determinants and impact of sovereign credit ratings," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 37-53.
    8. Jean Dermine, 1996. "European Banking with a Single Currency," Center for Financial Institutions Working Papers 96-54, Wharton School Center for Financial Institutions, University of Pennsylvania.
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