DP4521 The Real Effects of the Euro: Evidence from Corporate Investments
|Author(s):||Arturo Bris, Yrjö Koskinen, Mattias Nilsson|
|Publication Date:||August 2004|
|Keyword(s):||cost of capital, currency union, Economic and Monetary Union (EMU), investments, the euro|
|JEL(s):||F33, F36, G32|
|Programme Areas:||International Macroeconomics, Financial Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=4521|
Existing evidence shows that the Economic and Monetary Union (EMU) has reduced the cost of capital for firms in the euro area. We study the impact of the adoption of the euro in January 1999 by 11 countries in Europe on the firms? investment rates, and show that the investment results are consistent with reduction in cost of capital. Using corporate data from the 11 EMU countries, as well as from a control sample of 5 non-EMU, European countries, our paper shows that: (i) investments for EMU-firms have grown 2.5% more than for non-EMU firms, after 1999; and (ii) the benefits of the euro accrue especially to small, domestic firms from countries with previously weak currencies.