Monetary integration and the cost of borrowing

Marta Gómez-Puig ()

No 05-05, Working Papers on International Economics and Finance from FEDEA

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.

New Economics Papers: this item is included in nep-eec, nep-mac and nep-mon
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Related works:
Working Paper: Monetary Integration and the Cost of Borrowing (2005)
Journal Article: Monetary integration and the cost of borrowing (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:fda:fdadef:05-05

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