The Real Effects of the Euro: Evidence from Corporate Investments

Arturo Bris, Yrjö Koskinen () and Mattias Nilsson

No 4521, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Existing evidence shows that the Economic and Monetary Union (EMU) has reduced the cost of capital for firms in the euro area. We study the impact of the adoption of the euro in January 1999 by 11 countries in Europe on the firms? investment rates, and show that the investment results are consistent with reduction in cost of capital. Using corporate data from the 11 EMU countries, as well as from a control sample of 5 non-EMU, European countries, our paper shows that: (i) investments for EMU-firms have grown 2.5% more than for non-EMU firms, after 1999; and (ii) the benefits of the euro accrue especially to small, domestic firms from countries with previously weak currencies.

Keywords: Economic and monetary union (emu); The euro; Investments; Cost of capital; Currency union (search for similar items in EconPapers)
JEL-codes: F33 F36 G32 (search for similar items in EconPapers)
Date: 2004-08
New Economics Papers: this item is included in nep-eec and nep-fin
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Citations: View citations in EconPapers (5)

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Journal Article: The Real Effects of the Euro: Evidence from Corporate Investments (2006)
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