Please use this identifier to cite or link to this item: https://doi.org/10.21256/zhaw-22609
Publication type: Article in scientific journal
Type of review: Peer review (publication)
Title: The more the merrier? : the reaction of euro area stock markets to new members
Authors: Grigaliuniene, Zana
Celov, Dmitrij
Hartwell, Christopher A.
et. al: No
DOI: 10.1016/j.intfin.2020.101195
10.21256/zhaw-22609
Published in: Journal of International Financial Markets, Institutions and Money
Volume(Issue): 66
Issue: 101195
Issue Date: 2020
Publisher / Ed. Institution: Elsevier
ISSN: 1042-4431
Language: English
Subjects: APARCH; Asymmetric effect; Currency union; EURO
Subject (DDC): 332: Financial economics
Abstract: The adoption of the euro is a crucial turning point for the economy of any EU member and the culmination of a long process of exchange rate management and macroeconomic convergence. But how does the prospect of euro area enlargement play out in the countries that have already adopted the euro? Are new members seen as a way to expand the club of like-minded countries, or are they perceived as a threat to stability, either because there exists a moral hazard risk from the side of old members to adopt riskier behavior on behalf of new members or vice versa? This paper looks at the effects of the news of the euro’s adoption event in new members on the stock returns of nineteen euro area countries, employing both an event study methodology and APARCH modeling to capture and test the form of responses of European financial market volatility. Our results show that markets were indeed pleased when new members joined the euro area, with negative responses due solely to local conditions rather than euro area-wide travails. In our most interesting finding, the expansion of the euro actually helped to dampen local market volatility in the post-crisis period in the founding member states, while euro adoption quelled volatility both pre- and post-crisis for non-founding members.
URI: https://digitalcollection.zhaw.ch/handle/11475/22609
Fulltext version: Accepted version
License (according to publishing contract): CC BY-NC-ND 4.0: Attribution - Non commercial - No derivatives 4.0 International
Restricted until: 2022-04-12
Departement: School of Management and Law
Organisational Unit: International Management Institute (IMI)
Appears in collections:Publikationen School of Management and Law

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