The Euro and International Capital Markets

55 Pages Posted: 11 Dec 2002

See all articles by Carsten Detken

Carsten Detken

European Central Bank (ECB)

Philipp Hartmann

European Central Bank (ECB); Centre for Economic Policy Research (CEPR) - International Macroeconomics

Multiple version iconThere are 3 versions of this paper

Date Written: April 2000

Abstract

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.

Keywords: International Capital Markets, International Currencies, Euro, Dollar, Yen, EMU, Capital Flows, International Monetary System, Portfolio Selection, Money Markets, Bond Markets, Equity Markets, Bank Lending

JEL Classification: G15, F32, G11, F21

Suggested Citation

Detken, Carsten and Hartmann, Philipp, The Euro and International Capital Markets (April 2000). ECB Working Paper No. 19. Available at SSRN: https://ssrn.com/abstract=355561

Carsten Detken (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
0049 69 13440 (Phone)
0049 69 1344 6000 (Fax)

Philipp Hartmann

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
(49 69) 1344 7356 (Phone)
(49 69) 1344 8553 (Fax)

Centre for Economic Policy Research (CEPR) - International Macroeconomics

London
United Kingdom

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