CEPR Policy Paper
1 primary work
Book 5
EMU and Portfolio Adjustment
by Michael R. Wickens, Jean-Pierre Danthine, Rony Hamaui, Laura Bottazzi, Andreas M. Fischer, Kpate Adjaoute, and Richard Portes
Published 1 March 2001
The advent of the euro is a significant event for portfolio managers, both within and outside the monetary union. The euro will affect portfolio decisions through a variety of channels and the emergence of a single currency marks the disappearance of explicit and psychological barriers to international investing. The set of investment opportunities qualifying as 'domestic' is expanding, while the need for diversification across currencies must now be met by an increased demand for assets which are not denominated in euros. This paper examines the principal factors influencing the portfolio reallocation process following the introduction of the euro. Three broad categories of possible portfolio allocation are considered: domestic versus non-domestic investment, debt versus equity investment, and public debt versus private debt investment.