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5 - The international equity holdings of euro area investors
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- By Philip R. Lane, Director Institute for International Integration Studies (IIIS); Professor International Macroeconomics (Trinity College Dublin) and a Research Fellow of the CEPR., Gian Maria Milesi-Ferretti, Chief Economic Modelling Division, Research Dept, International Monetary Fund, and Research Fellow of the CEPR
- Edited by Filippo Di Mauro, European Central Bank, Frankfurt, Robert Anderton, European Central Bank, Frankfurt
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- Book:
- The External Dimension of the Euro Area
- Published online:
- 22 September 2009
- Print publication:
- 26 April 2007, pp 95-117
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Summary
Introduction
The integration of euro area financial markets since the launch of the euro in 1999 has been at the centre of attention in policy debate and academic literature. This chapter complements this much-explored line of research by examining a subject that has attracted much less attention – namely, the characteristics of the euro area's external portfolio investment, and particularly the geographical allocation of the international equity portfolios held by euro area investors.
The geography of the euro area's external equity holdings is important for several reasons. First, the level of holdings in each international market is a direct determinant of the euro area's exposure to external financial shocks. Second, it is also useful to assess whether international investment provides diversification against internal risks. Third, differences in the composition of international portfolios between the euro area and other major economic blocs (e.g. the United States and Japan) may generate asymmetric responses to international financial crises or global shocks, which in turn may pose a challenge for coordinated management of the international financial system.
Our empirical work is made possible by the release of the International Monetary Fund's Coordinated Portfolio Investment Survey (CPIS). This dataset, described more in detail in section 5.2, provides a unique perspective on the geographical patterns of international portfolio holdings for most major international investors, including the entire euro area.
8 - Why capital controls? Theory and evidence
- from II - Exchange rate policy and redistribution
- Edited by Sylvester C. W. Eijffinger, Katholieke Universiteit Brabant, The Netherlands, Harry P. Huizinga, Katholieke Universiteit Brabant, The Netherlands
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- Book:
- Positive Political Economy
- Published online:
- 05 September 2013
- Print publication:
- 09 March 1998, pp 217-247
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Summary
Introduction
The last decade has been characterized by a financial liberalization process that has led several industrialized and developing countries to dismantle or drastically reduce restrictions on international capital mobility. In the countries belonging to the European Monetary System, capital controls were gradually dismantled during the 1980s and abolished by 1990. In several developing countries, barriers to international capital movements are being reduced, as domestic investors are allowed to purchase foreign assets and non-residents to invest in domestic financial markets. The removal of restrictions to capital mobility was undertaken with the primary purpose of improving economic efficiency through better resource allocation and a more efficient functioning of financial markets. The liberalization of capital flows would also allow domestic investors to better hedge against macroeconomic risks through international portfolio diversification. The process of financial liberalization was further stimulated by the realization that the technological progress in telecommunications together with the growing integration of financial markets made it more difficult for authorities to effectively monitor capital flows.
Two recent developments, however, have contributed to give prominence once again to the debate on the usefulness of restrictions on international capital flows. The first is the series of speculative attacks on currencies belonging to the European Monetary System and to the European Free Trade Area, beginning in September 1992, that brought abruptly to an end a period of exchange rate stability in Europe.