The paper presents a framework for analyzing the degree of financial transmission between money, bond and equity markets and exchange rates within and between the United States and the euro area. We find that asset prices react strongest to other domestic asset price shocks, and that there are...

We examine the bilateral composition of international bond portfolios for the euro area and the individual EMU member countries. We find considerable support for “euro area bias”: EMU member countries disproportionately invest in one another relative to other country pairs. Another striking...

Although recent research shows that the euro has spurred cross-border financial integration, the exact mechanisms remain unknown. We investigate the underlying channels of the euro’s effect on financial integration using data on bilateral banking linkages among twenty industrial countries in...

Wirtschaftspolitische Entscheidungsträger haben die Target2-Salden in den vergangenen Monaten zunehmend als wichtigen Gradmesser der Eurokrise zu schätzen gelernt und ihren Abwärtstrend als positives Zeichen interpretiert. Umso erstaunlicher ist es, dass die Daten noch immer in keiner...

On January 1,1999 euro became the currency for 11 member states of the European Union. Since then the dollar-euro exchange rate has completed a full turning. Three years of depreciation of the euro followed by three years of appreciation without wild fluctuations asks for an explanation which...

Foreign direct investment is of increasing importance in the European Union. This paper estimates the effect of taxes on foreign direct investment (FDI) flows and on three sub-components of these flows for the countries of the en- larged European Union. The model in the spirit of gravity...

This paper presents an empirical analysis of transmission rates from exchange rate movements to import prices, across countries and product categories, in the euro area over the last fifteen years. Our results show that the transmission of exchange rate changes to import prices in the short run...

Countries aspiring to join the euro area—the so-called accession countries—are increasingly binding their economic activity, external and internal, to the euro-area countries. This phenomenon is observed in the currency invoicing of international trade transactions, where accession countries...

The perceptions of a central bank’s inflation aversion may reflect institutional structure or, more dynamically, the history of its policy decisions. In this paper, we present a novel empirical framework that uses high-frequency data to test for persistent variation in market perceptions of...

The first decade of economic and monetary union in Europe (EMU) has been a huge success. EMU has significantly benefited its member countries and accelerated the European integration process. Imbalances within EMU - differences in growth, inflation, competitiveness, current account and budget...