Empirical estimates of the impact of the euro on the corporate bond market in the euro area

Abstract

Empirical estimates of an error-correction model, nested in a partial adjustment framework, show that the euro had a temporary impact, via mergers and acquisitions activity, on corporate bond issuance in the euro area. In addition, a permanent effect is found for corporate bonds issued by non-monetary financial corporations. For the first five years of the single currency, these effects are estimated to have been up to 2½ and around 5½ percentage points, respectively, of the annual bond market growth. Other significant determinants of corporate bond issuance are economic activity, the cost of bond issuance relative to other sources of external finance and mergers and acquisitions.

Acknowledgements

Comments by Jesper Berg and Hans-Joachim Klöckers and statistical assistance by Martin Admiraal are appreciated. All views expressed are those of the authors alone and do not necessarily reflect those of the ECB or the Eurosystem.