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MARKET RISK DYNAMICS AND COMPETITIVENESS AFTER THE EURO: Evidence from EMU Members

  • Juan Piñeiro Chousa,

    ()

  • Artur Tamazian,

    ()

  • Davit N. Melikyan,

    ()

Registered author(s):

    In this paper we propose an empirical model that considers theoretical facts on the relationship between real exchange rates and the net exports of the economy to supplement the interaction of a number of financial and economic factors with the stock market. We discuss the impact of exchange rate fluctuations on market risk in terms of Value at Risk (VaR). Our empirical findings show that common currency introduction produced increments in VaR whereas European stock returns are more sensitive to changes in competitiveness regarding the EMU rather than national exports. Finally, we show that the synchronisation of variation in competitiveness through the introduction of a single currency has made these changes more decisive in explaining financial market fluctuations.

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    File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp916.pdf
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    Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp916.

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    Date of creation: 01 Feb 2008
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    Handle: RePEc:wdi:papers:2008-916
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