Monetary and Financial Integration: Evidence from Portuguese Borrowing Patterns

FRB San Francisco Working Paper No. 2004-7

38 Pages Posted: 13 Oct 2004  

Mark M. Spiegel

Federal Reserve Bank of San Francisco - Economic Research Department

Date Written: June 2004

Abstract

This paper examines the impact of European Monetary Union (EMU) accession on bilateral Portuguese international borrowing patterns. Using a difference-in-differences methodology, I demonstrate that Portugal's accession to the EMU was accompanied by a change in its borrowing pattern in favor of borrowing from its EMU partner nations. This extends the evidence in the literature that overall international borrowing is facilitated by the creation of a monetary union, and raises the issue of financial diversion. The results are shown to survive a wide variety of robustness checks and are corroborated by preliminary evidence concerning Greece's accession to EMU in 2001.

Keywords: Monetary union, financial integration, difference-in-differences, Portugal

JEL Classification: F15, F33

Suggested Citation

Spiegel, Mark M., Monetary and Financial Integration: Evidence from Portuguese Borrowing Patterns (June 2004). FRB San Francisco Working Paper No. 2004-7. Available at SSRN: https://ssrn.com/abstract=602761 or http://dx.doi.org/10.2139/ssrn.602761

Mark M. Spiegel (Contact Author)

Federal Reserve Bank of San Francisco - Economic Research Department ( email )

101 Market Street
San Francisco, CA 94105
United States
415-974-3184 (Phone)
415-974-2168 (Fax)

HOME PAGE: http://www.frbsf.org/economics/economists/mspiegel.html

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