Title: Monetary unification and the price of risk: An unconditional analysis
Authors: Dewachter, Hans
Maes, Konstantijn
Smedts, Kristien
Issue Date: 2002
Publisher: K.U.Leuven, Faculty of Economics and Applied Economics : Department of Economics
Series Title: CES - Discussion Paper Series (DPS) 02.01 pages:1-33
Abstract: In this paper we assess the effects of monetary unification in Europe on the pricing behavior in financial markets and more in particular on excess returns. We use the standard IAPT framework to analyze the role of the exchange rate in separating excess return pricing across European countries. We find that, already in the decade prior to EMU, exchange rate changes do not (unconditionally) correlate strongly with financial market movements across countries. Consequently, elimination of exchange rate variability through monetary unification is not likely to have had major implications for pricing behavior in EMU markets
Publication status: published
KU Leuven publication type: IR
Appears in Collections:Research Center of International Economics, Leuven
Department of Economics, Leuven - miscellaneous
Research Center Finance, Leuven

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