Global Bond Portfolios and Emu

47 Pages Posted: 11 Nov 2005

See all articles by Philip R. Lane

Philip R. Lane

Trinity College (Dublin) - Department of Economics; Centre for Economic Policy Research (CEPR); Central Bank of Ireland

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Date Written: November 2005

Abstract

We examine the bilateral composition of international bond portfolios for the euro area and the individual EMU member countries. We find considerable support for "euro area bias": EMU member countries disproportionately invest in one another relative to other country pairs. Another striking pattern is the positive connection between trade linkages and financial linkages in explaining asymmetries across EMU member countries in terms of their outward and inward bond investments vis-a-vis external counterparties. At the aggregate level, it is those countries physically closest to the euro area that are both the most important destinations and sources for external bond investment vis-a-vis the euro area. Our empirical results support the notion that financial regionalization is the leading force underlying financial globalization.

Keywords: EMU, bond portfolios, financial integration

JEL Classification: E4, F2, F3, F4

Suggested Citation

Lane, Philip R., Global Bond Portfolios and Emu (November 2005). ECB Working Paper No. 553. Available at SSRN: https://ssrn.com/abstract=841471

Philip R. Lane (Contact Author)

Trinity College (Dublin) - Department of Economics ( email )

Trinity College
Dublin 2
Ireland
+353 1 608 2259 (Phone)
+353 1 677 2503 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Central Bank of Ireland ( email )

P.O. Box 559
Dame Street
Dublin, 2
Ireland

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