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Empirical estimates of the impact of the euro on the corporate bond market in the euro area

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  • Gabe de Bondt
  • Jung-Duk Lichtenberger

Abstract

Empirical estimates of an error-correction model, nested in a partial adjustment framework, show that the euro had a temporary impact, via mergers and acquisitions activity, on corporate bond issuance in the euro area. In addition, a permanent effect is found for corporate bonds issued by non-monetary financial corporations. For the first five years of the single currency, these effects are estimated to have been up to 2½ and around 5½ percentage points, respectively, of the annual bond market growth. Other significant determinants of corporate bond issuance are economic activity, the cost of bond issuance relative to other sources of external finance and mergers and acquisitions.

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  • Gabe de Bondt & Jung-Duk Lichtenberger, 2004. "Empirical estimates of the impact of the euro on the corporate bond market in the euro area," Applied Economics Letters, Taylor & Francis Journals, vol. 11(11), pages 675-678.
    • Handle: RePEc:taf:apeclt:v:11:y:2004:i:11:p:675-678
    DOI: 10.1080/1350485042000236520
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    References listed on IDEAS

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    1. Philipp Hartmann & Angela Maddaloni & Simone Manganelli, 2003. "The Euro-area Financial System: Structure, Integration, and Policy Initiatives," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 19(1), pages 180-213.
    2. Gabriele Galati & Kostas Tsatsaronis, 2001. "The impact of the euro on Europe's financial markets," BIS Working Papers 100, Bank for International Settlements.
    3. E. P. Davis, 2001. "Multiple Avenues of Intermediation, Corporate Finance and Financial Stability," IMF Working Papers 2001/115, International Monetary Fund.
    4. Mr. Joaquim Vieira Ferreira Levy & Mr. Alessandro Calza & Mr. Dieter Gerdesmeier, 2001. "Euro Area Money Demand: Measuring the Opportunity Costs Appropriately," IMF Working Papers 2001/179, International Monetary Fund.
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    Cited by:

    1. Avadanei, Andreea, 2010. "European corporate bond market integration: lessons from EMU," MPRA Paper 27309, University Library of Munich, Germany.
    2. Korkeamäki, Timo, 2011. "Interest rate sensitivity of the European stock markets before and after the euro introduction," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(5), pages 811-831.

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