Monetary Integration and the Cost of Borrowing

Marta Gómez-Puig ()

No 134, Working Papers in Economics from Universitat de Barcelona. Espai de Recerca en Economia

Abstract: With the beginning of the European Monetary Union (EMU), euro-area sovereign securities adjusted spreads over Germany (corrected from the foreign exchange risk) experienced an increase that caused a lower than expected decline in borrowing costs. The objective of this paper is to study what explains that rising. In particular, if it took place a change in the price assigned by markets to domestic (credit risk and/or market liquidity) or to international risk factors. The empirical evidence supports the idea that a change in the market value of liquidity occurred with the EMU. International and default risk play a smaller role.

JEL-codes: G15 F36 E44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-mac and nep-mon
Date: 2005
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Related works:
Working Paper: Monetary integration and the cost of borrowing
Journal Article: Monetary integration and the cost of borrowing (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:bar:bedcje:2005134

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