Working Paper: CEPR ID: DP2413
Authors: Jean-Pierre Danthine; Francesco Giavazzi; Ernst-Ludwig von Thadden
Abstract: This paper reviews the first evidence on the impact of European Monetary Union on European capital markets, one year after the launch of the single currency. Our assessment of this evidence is very favourable. On almost all counts EMU has either already drastically changed the European financial landscape or has the potential to do so in the future. We argue that this is less due to the well-known direct effects of EMU, such as the elimination of intra-European currency risk, than to a number of indirect consequences through feedback mechanisms that seem to have been triggered by EMU.
Keywords: European Monetary Union; Financial Markets; Market Integration
JEL Codes: E44; F21; F36; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| EMU (F36) | Elimination of intra-European currency risk (F36) |
| EMU (F36) | Standardization of pricing (L11) |
| Elimination of intra-European currency risk (F36) | Changes in market behavior (G40) |
| Standardization of pricing (L11) | Changes in market behavior (G40) |
| EMU (F36) | Increased liquidity in the market (G19) |
| Increased liquidity in the market (G19) | Increase in market depth and breadth (G10) |
| EMU (F36) | Transformation of the corporate bond market (G19) |
| EMU (F36) | Emergence of new equity markets (G10) |
| EMU (F36) | Increased cross-border mergers in various industries (F29) |
| EMU (F36) | Long-term impacts on investor behavior and market integration (G41) |