The Euro and International Capital Markets

International Bond Markets and the Introduction of the Euro

O January 1, 1999, the euro was formally introduced in 11 countries of the European Union. At that date, the European Central Bank (ECB) received control over monetary policy in the Euro area. Only the United Kingdom, Denmark and Sweden voluntarily opted out, for the moment, while Greece was deemed not ready for entry. Obviously, the introduction of the euro will have significant consequences f...

Centre for International Capital Markets

This paper examines the PPP hypothesis analysing the behaviour of the real exchange rates vis-à-vis the US dollar for four major currencies (namely, the Canadian dollar, the euro, the Japanese yen and the British pound). An innovative approach based on fractional integration in a multivariate context is applied to annual data from 1970 to 2011. Long memory is found to characterise the Canadian ...

Centre for International Capital Markets

International Capital Markets and Foreign Exchange Risk ∗

The relation between the volatilities of pricing kernels associated with different currencies and the volatility of the exchange rate between the currencies is derived under the assumption of integrated capital markets, and the volatilities of the pricing kernels are related to the foreign exchange risk premium. Time series of pricing kernel volatilities are estimated from panel data on bond yi...

The Euro and Financial Markets

The financial landscape of Europe has been evolving rapidly in the past 20 years. The introduction of the euro and the inception of the single monetary policy on January 1, 1999, accelerated the pace of change. However, it is clear that many driving factors foster transformation in the European financial system, including the Single Market Program, technological developments, financial innovati...