MONETARY INTEGRATION AND THE COST OF BORROWING

Marta Gómez-Puig ()

No 05-05, Working Papers from Asociación Española de Economía y Finanzas Internacionales

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.

Keywords: Monetary integration; sovereign securities’ markets; international and domestic credit risk; and market liquidity (search for similar items in EconPapers)
JEL-codes: E44 F36 G15 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2005-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Monetary integration and the cost of borrowing (2008)
Working Paper: Monetary Integration and the Cost of Borrowing (2005)
Working Paper: Monetary integration and the cost of borrowing
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Persistent link: https://EconPapers.repec.org/RePEc:aee:wpaper:0505

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