IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The euro and international capital markets

  • Detken, Carsten
  • Hartmann, Philipp

This paper provides a broad empirical examination of the major currencies' roles in international capital markets, with a special emphasis on the first year of the euro. A contribution is made as to how to measure these roles, both from the viewpoint of international financing as well as from the one of international investment activities. Time series of these new measures are presented, including euro aggregates calculated up to five years back in time. The data allow for the identification of changes in the role of the euro (or other main currencies) during 1999 compared to the aggregate of euro predecessor currencies, net of intra-euro area assets/ liabilities, before stage 3 of EMU. A number of key factors determining the currency distribution of international portfolio investments, such as relative market liquidity and relative risk characteristics of assets, are also examined empirically. It turns out that for almost all important market segments for which data are available, the euro immediately became the second most widely used currency for international financing and investment. For the flow of international bond and note issuance it has even slightly overtaken the US dollar in the second half of 1999. The data also suggest that this early supply of euro bonds by non-euro area residents, clearly exceeding the euro-predecessor currency aggregate, is actually absorbed by euro area residents and not y outside investors so far. JEL Classification: G15, F32, G11, F21

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp19.pdf
Download Restriction: no

Paper provided by European Central Bank in its series Working Paper Series with number 0019.

as
in new window

Length:
Date of creation: Apr 2000
Date of revision:
Handle: RePEc:ecb:ecbwps:20000019
Contact details of provider: Postal: 60640 Frankfurt am Main, Germany
Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Cohen, Daniel, 1997. "How Will the Euro behave?," CEPR Discussion Papers 1673, C.E.P.R. Discussion Papers.
  2. Paul R. Krugman, 1979. "Vehicle Currencies And the Structure Of International Exchange," NBER Working Papers 0333, National Bureau of Economic Research, Inc.
  3. Lawrence R. Glosten & Paul R. Milgrom, 1983. "Bid, Ask and Transaction Prices in a Specialist Market with Heterogeneously Informed Traders," Discussion Papers 570, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Martin, Philippe, 1997. "The Exchange Rate Policy of the Euro: A Matter of Size?," CEPR Discussion Papers 1646, C.E.P.R. Discussion Papers.
  5. Uppal, Raman, 1993. " A General Equilibrium Model of International Portfolio Choice," Journal of Finance, American Finance Association, vol. 48(2), pages 529-53, June.
  6. Hans R. Stoll, . "The Supply of Dealer Services in Securities Markets," Rodney L. White Center for Financial Research Working Papers 2-78, Wharton School Rodney L. White Center for Financial Research.
  7. Hartmann, Philipp, 1999. "Trading volumes and transaction costs in the foreign exchange market: Evidence from daily dollar-yen spot data," Journal of Banking & Finance, Elsevier, vol. 23(5), pages 801-824, May.
  8. Michael Leahy, 1996. "The dollar as an official reserve currency under EMU," Open Economies Review, Springer, vol. 7(4), pages 371-390, October.
  9. Adler, Michael & Dumas, Bernard, 1983. " International Portfolio Choice and Corporation Finance: A Synthesis," Journal of Finance, American Finance Association, vol. 38(3), pages 925-84, June.
  10. Guillermo Calvo & Carlos A. Végh Gramont, 1992. "Currency Substitution in Developing Countries; An Introduction," IMF Working Papers 92/40, International Monetary Fund.
  11. Hartmann, Philipp, 1998. "The Currency Denomination of World Trade after European Monetary Union," Journal of the Japanese and International Economies, Elsevier, vol. 12(4), pages 424-454, December.
  12. Cooper, Ian & Kaplanis, Evi, 1994. "Home Bias in Equity Portfolios, Inflation Hedging, and International Capital Market Equilibrium," Review of Financial Studies, Society for Financial Studies, vol. 7(1), pages 45-60.
  13. Branson, William H. & Henderson, Dale W., 1985. "The specification and influence of asset markets," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 15, pages 749-805 Elsevier.
  14. McCauley, R.N., 1997. "The Euro and the Dollar," Princeton Essays in International Economics 205, International Economics Section, Departement of Economics Princeton University,.
  15. Paul R. Krugman, 1984. "The International Role of the Dollar: Theory and Prospect," NBER Chapters, in: Exchange Rate Theory and Practice, pages 261-278 National Bureau of Economic Research, Inc.
  16. Glassman, Debra, 1987. "Exchange rate risk and transactions costs: Evidence from bid-ask spreads," Journal of International Money and Finance, Elsevier, vol. 6(4), pages 479-490, December.
  17. Hartmann, Philipp, 1998. "Do Reuters spreads reflect currencies' differences in global trading activity?," Journal of International Money and Finance, Elsevier, vol. 17(5), pages 757-784, October.
  18. Shang-Jin Wei, 1991. "Anticipations of foreign exchange volatility and bid-ask spreads," International Finance Discussion Papers 409, Board of Governors of the Federal Reserve System (U.S.).
  19. Maehara, Yasuhiro, 1993. "The internationalization of the Yen and its role as a key currency," Journal of Asian Economics, Elsevier, vol. 4(1), pages 153-170.
  20. Ramchand, Latha & Susmel, Raul, 1998. "Volatility and cross correlation across major stock markets," Journal of Empirical Finance, Elsevier, vol. 5(4), pages 397-416, October.
  21. Cukierman, Alex, 1983. "Relative price variability and inflation: A survey and further results," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 19(1), pages 103-157, January.
  22. Gros, Daniel, 1998. "EMU and Capital Markets: Big Bang or Glacier?," International Finance, Wiley Blackwell, vol. 1(1), pages 3-34, October.
  23. P Martin & H Rey, 2000. "Financial Super-Markets: Size Matters for Asset Trade," CEP Discussion Papers dp0450, Centre for Economic Performance, LSE.
  24. Alogoskoufis, George & Portes, Richard & Rey, Hélène, 1997. "The Emergence of the Euro as an International Currency," CEPR Discussion Papers 1741, C.E.P.R. Discussion Papers.
  25. Bollerslev, Tim & Melvin, Michael, 1994. "Bid--ask spreads and volatility in the foreign exchange market : An empirical analysis," Journal of International Economics, Elsevier, vol. 36(3-4), pages 355-372, May.
  26. Pagano, Marco, 1986. "Trading Volume and Asset Liquidity," CEPR Discussion Papers 142, C.E.P.R. Discussion Papers.
  27. repec:cup:cbooks:9780521046930 is not listed on IDEAS
  28. Bessembinder, Hendrik, 1994. "Bid-ask spreads in the interbank foreign exchange markets," Journal of Financial Economics, Elsevier, vol. 35(3), pages 317-348, June.
  29. Black, Stanley W., 1985. "International money and international monetary arrangements," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 22, pages 1153-1193 Elsevier.
  30. Rey, Helene, 2001. "International Trade and Currency Exchange," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 443-64, April.
  31. John F. O. Bilson & Richard C. Marston, 1984. "Exchange Rate Theory and Practice," NBER Books, National Bureau of Economic Research, Inc, number bils84-1.
  32. Easley, David & O'Hara, Maureen, 1992. " Time and the Process of Security Price Adjustment," Journal of Finance, American Finance Association, vol. 47(2), pages 576-605, June.
  33. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, June.
  34. Boothe, Paul M, 1988. "Exchange Rate Risk and the Bid-Ask Spread: A Seven Country Comparison," Economic Inquiry, Western Economic Association International, vol. 26(3), pages 485-92, July.
  35. Lucas, Robert Jr., 1982. "Interest rates and currency prices in a two-country world," Journal of Monetary Economics, Elsevier, vol. 10(3), pages 335-359.
  36. Tauchen, George E & Pitts, Mark, 1983. "The Price Variability-Volume Relationship on Speculative Markets," Econometrica, Econometric Society, vol. 51(2), pages 485-505, March.
  37. Tavlas, G.S., 1991. "On the International Use of Currencies: the Case of the Deutsche Mark," Princeton Studies in International Economics 181, International Economics Section, Departement of Economics Princeton University,.
  38. Garry J. Schinasi & Alessandro Prati, 1997. "European Monetary Union and International Capital Markets; Structural Implications and Risks," IMF Working Papers 97/62, International Monetary Fund.
  39. Black, Stanley W., 1991. "Transactions costs and vehicle currencies," Journal of International Money and Finance, Elsevier, vol. 10(4), pages 512-526, December.
  40. Eichengreen, Barry, 1998. "The Euro as a Reserve Currency," Journal of the Japanese and International Economies, Elsevier, vol. 12(4), pages 483-506, December.
  41. Linda L. Tesar & Ingrid M. Werner, 1992. "Home Bias and the High Turnover," NBER Working Papers 4218, National Bureau of Economic Research, Inc.
  42. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
  43. Dermine, Jean & Hillion, Pierre (ed.), 1999. "European Capital Markets with a Single Currency," OUP Catalogue, Oxford University Press, number 9780198295396, March.
  44. Coutinho, L., 1999. "Euro Exchange Rates: What Can Be Expected in Terms of Volatility?," Economics Working Papers eco99/20, European University Institute.
  45. Copeland, Thomas E & Galai, Dan, 1983. " Information Effects on the Bid-Ask Spread," Journal of Finance, American Finance Association, vol. 38(5), pages 1457-69, December.
  46. Stockman, Alan C. & Dellas, Harris, 1989. "International portfolio nondiversification and exchange rate variability," Journal of International Economics, Elsevier, vol. 26(3-4), pages 271-289, May.
  47. Philipp Hartmann, 1996. "The Future of the Euro as an International Currency: a Transactions Perspective," FMG Special Papers sp91, Financial Markets Group.
  48. Karpoff, Jonathan M., 1987. "The Relation between Price Changes and Trading Volume: A Survey," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(01), pages 109-126, March.
  49. Longin, Francois & Solnik, Bruno, 1995. "Is the correlation in international equity returns constant: 1960-1990?," Journal of International Money and Finance, Elsevier, vol. 14(1), pages 3-26, February.
  50. repec:cup:cbooks:9780521558839 is not listed on IDEAS
  51. Agmon, Tamir & Barnea, Amir, 1977. "Transaction costs and marketability services in the Eurocurrency money market," Journal of Monetary Economics, Elsevier, vol. 3(3), pages 359-366, July.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:20000019. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Official Publications)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.