Working Paper: CEPR ID: DP2298
Authors: Richard Portes
Abstract: Europe's contribution to the international financial system is a new currency, the euro. Economic and Monetary Union in Europe (EMU), of which the single currency is the manifestation, has emerged in the context of a complex process of interaction between globalisation and regional integration. This paper discusses the internationalisation of the euro and draws out the consequences for European securities markets, exchange rates, and international financial stability.
Keywords: euro; EMU; securities markets; exchange rates
JEL Codes: F21; F30; F40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| globalization + regional integration (F15) | euro's emergence as a new international currency (F36) |
| integration of euro capital markets (F36) | large portfolio shifts (G11) |
| large portfolio shifts (G11) | euro appreciating significantly against the dollar (F31) |
| euro government bond market liquidity (G15) | attract more investors (G24) |
| volatility of euro's real effective exchange rate (F31) | exceed that of Deutsche Mark (F31) |
| shifts in capital flows (F32) | systemic changes (P39) |
| systemic changes (P39) | amplify shocks in international capital markets (F65) |
| financial markets + beliefs of market participants (G19) | outcome of dollar-euro competition (F31) |
| euro's competition with the dollar (F31) | implications for emerging market countries and global financial stability (F65) |