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Who drove the boom in euro-denominated bond issues?

Author

Listed:
  • Galina Hale
  • Mark M. Spiegel

Abstract

We make use of micro-level data for over 45,000 private bonds issued by over 5000 firms from 22 countries in 1990-2006 to analyze the impact that the launch of the EMU had on the currency denomination of the bond issues. To our knowledge, ours is the first systematic analysis of issue at the micro level. The use of the micro data allows us to distinguish between the response to the advent of the euro by new and seasoned bond issuers, and to condition on other issue characteristics. We find that the impact on new issuers is larger than on seasoned issuers and that most of the increase in the euro-denominated bond issuance was along the "extensive" margin. Insofar as new entrants to the bond market will define the overall currency composition in the long run, these results imply that aggregate studies might be underestimating the euro effect. We also find that to a large extent the increase in euro issuance was "at the expense" of U.S. dollar issuance, suggesting that the euro competes with the U.S. dollar as a currency of choice for international financial transactions.

Suggested Citation

  • Galina Hale & Mark M. Spiegel, 2008. "Who drove the boom in euro-denominated bond issues?," Working Paper Series 2008-20, Federal Reserve Bank of San Francisco.
  • Handle: RePEc:fip:fedfwp:2008-20
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    References listed on IDEAS

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    3. Nicolas Coeurdacier & Philippe Martin, 2009. "The Geography of Asset Trade and the Euro: Insiders and Outsiders," NBER Chapters,in: Financial Globalization, 20th Anniversary Conference, NBER-TCER-CEPR National Bureau of Economic Research, Inc.
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    5. Hale, Galina & Santos, João A.C., 2009. "Do banks price their informational monopoly?," Journal of Financial Economics, Elsevier, vol. 93(2), pages 185-206, August.
    6. Spiegel, Mark M., 2009. "Monetary and financial integration: Evidence from the EMU," Journal of the Japanese and International Economies, Elsevier, vol. 23(2), pages 114-130, June.
    7. Philip R. Lane, 2006. "Global Bond Portfolios and EMU," International Journal of Central Banking, International Journal of Central Banking, vol. 2(2), May.
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    Cited by:

    1. Kalemli-Ozcan, Sebnem & Papaioannou, Elias & Peydró, José-Luis, 2010. "What lies beneath the euro's effect on financial integration? Currency risk, legal harmonization, or trade?," Journal of International Economics, Elsevier, vol. 81(1), pages 75-88, May.
    2. Mark M. Spiegel, 2012. "Developing Asian Local Currency Bond Markets: Why and How?," Chapters,in: Implications of the Global Financial Crisis for Financial Reform and Regulation in Asia, chapter 11 Edward Elgar Publishing.
    3. Morgan, Peter J. & Lamberte , Mario, 2012. "Strengthening Financial Infrastructure," ADBI Working Papers 345, Asian Development Bank Institute.
    4. Schmitz, Birgit & von Hagen, Jürgen, 2009. "Current Account Imbalances and Financial Integration in the Euro Area," CEPR Discussion Papers 7262, C.E.P.R. Discussion Papers.
    5. Galina Hale, 2011. "Evidence on financial globalization and crisis: capital raisings," Working Paper Series 2011-04, Federal Reserve Bank of San Francisco.
    6. Rose, Andrew K. & Spiegel, Mark M., 2012. "Dollar illiquidity and central bank swap arrangements during the global financial crisis," Journal of International Economics, Elsevier, vol. 88(2), pages 326-340.
    7. 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.
    8. Galina Hale & Mark M. Spiegel, 2008. "The EMU effect on the currency denomination of international bonds," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue sep26.
    9. Bris, Arturo & Koskinen, Yrjö & Nilsson, Mattias, 2011. "The Euro and Corporate Financing," CEPR Discussion Papers 8227, C.E.P.R. Discussion Papers.

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    Keywords

    Bond market ; Euro;

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