The Price of Euro: Evidence from Sovereign Debt Markets
The objective of this paper is to figure out how the Economic and Monetary Union in Europe (EMU) has affected on its member's sovereign risk-premiums and long-term government bond yields. In order to estimate the effect, this paper utilizes synthetic control method. Contrary to the popular belief, this paper finds that the majority of member countries did not receive economic gains from EMU in sovereign debt markets. Synthetic counterfactual analysis finds strong evidence that Austria, Belgium, France, Germany and Netherlands have paid positive and substantial euro-premium in their 10-year government bonds since the adoption of single currency. After the latest financial crisis, government bond yields have been higher in all member countries compared to the situation that would have been without monetary unification. This paper concludes that from the sovereign borrowing viewpoint, it would be beneficial for a country to maintain its own currency and monetary policy.
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- De Grauwe, Paul & Ji, Yuemei, 2013.
"Self-fulfilling crises in the Eurozone: An empirical test,"
Journal of International Money and Finance,
Elsevier, vol. 34(C), pages 15-36.
- Paul De Grauwe & Yuemei Ji, 2012. "Self-Fulfilling Crises in the Eurozone. An Empirical Test," CESifo Working Paper Series 3821, CESifo Group Munich.
- Paul de Grauwe & Yuemei Ji, 2013. "Self-fulfilling crises in the Eurozone: an empirical test," LSE Research Online Documents on Economics 49648, London School of Economics and Political Science, LSE Library.
- Paul De Grauwe & Yuemei Ji, 2012. "Self-Fulfilling Crises in the Eurozone. An Empirical Test," CAMA Working Papers 2012-37, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- De Grauwe, Paul & Ji, Yuemei, 2012. "Self-Fulfilling Crises in the Eurozone: An Empirical Test," CEPS Papers 7085, Centre for European Policy Studies.
- Schuknecht, Ludger & von Hagen, Jürgen & Bernoth, Kerstin, 2004. "Sovereign risk premia in the European government bond market," Working Paper Series 369, European Central Bank.
- Toni Gravelle, 1999. "Liquidity of the Government of Canada Securities Market: Stylised Facts and Some Market Microstructure Comparisons to the United States Treasury Market," CGFS Papers chapters,in: Bank for International Settlements (ed.), Market Liquidity: Research Findings and Selected Policy Implications, volume 11, pages 1-37 Bank for International Settlements.
- Gravelle, Toni, 1999. "Liquidity of the Government of Canada Securities Market: Stylized Facts and Some Market Microstructure Comparisons to the United States Treasury Market," Staff Working Papers 99-11, Bank of Canada.
- Andreas Billmeier & Tommaso Nannicini, 2013. "Assessing Economic Liberalization Episodes: A Synthetic Control Approach," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 983-1001, July.
- Bernoth, Kerstin & von Hagen, Jürgen & Schuknecht, Ludger, 2004. "Sovereign risk premia in the European government bond market," ZEI Working Papers B 26-2003, University of Bonn, ZEI - Center for European Integration Studies.
- Bernoth, Kerstin & von Hagen, Jürgen & Schuknecht, Ludger, 2004. "Sovereign risk premia in the European government bond market," Working Paper Series 0369, European Central Bank.
- Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of Californiaâ€™s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505. Full references (including those not matched with items on IDEAS)
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