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1996 Fiscal Year Final Research Report Summary

Research on a multiplier effect between diversification of investment currencies in the European financial markets and concentration of vehicle currency into the Deutsche Mark

Research Project

Project/Area Number 07453011
Research Category

Grant-in-Aid for Scientific Research (B)

Allocation TypeSingle-year Grants
Section一般
Research Field Public finance/Monetary economics
Research InstitutionTohoku University

Principal Investigator

TANAKA Soko  Tohoku Univ.Faculty of Economics Professor, 経済学部, 教授 (20094708)

Co-Investigator(Kenkyū-buntansha) IWATA Kenji  Fukuoka Univ.Faculty of commerce Lecturer, 商学部, 講師 (50261483)
Project Period (FY) 1995 – 1996
Keywordsvehicle currency / international porffolio inrestment / convergence trade / EMS / Deutsche Mark / institutional invester / financial integration / EMU
Research Abstract

The Deutsche Mark became the European vehicle currency about 1990, getting rid of the US Dollar. This facr was proven by reports of some central banks in the European Union and by several field works done by some Japanese researchers in foreign exchange markets in Western Europe in the beginning of 1990s. In the interviews with foreign exchange dealers, stability of foreign exchange rates between EMS currencies is a very important factor which drove the Deutsche Mark, the key currency of the EMS,into the vehicle currency in Europe. As is known, a bid-ask spread of a currency in the interbank foreign exchange markets is a key factor foreign exchange dealers decide a vehicle currency. A bid-ask spread is proportional to transaction volume of a currency in the markets and disproportional to volatility of a currency. So it is clear that the stability of foreign exchange rates in the EMS can explain only one factor, namely scarce volatility between the D.Mark and other EMS currencies. The o … More ther factro, namely increasing transaction volume of the D.Mark, must be investigated.
This research formulated a kind of multiplier effect between "diversification" and "concentration"in the foreign exchange markets and crossborder financial markets. The diversification of investment currencies in the European financial markets has developed with the liberalization of exchange controls in the process of the completion of the internal market in the EC.European governments issued huge amount of bonds and the institutional investors have invested and transacted them on the crossborder base. The crossborder transactions of the international institutional investors accompany huge amounts of foreign exchange transactions. The scarce volatility of the D.Mark and other EMS currencies lowered the bid-ask spread of the D.Mark and the currency was selected as the vehicle currency in the European interbank markets. The D.Mark substituted the US dollar whose volatility was huge in the latter half of 1980s. Though Frankfurt foreign exchange market had faults, London market substituted for it as the center of foreign exchange transactions.
In this manner, the "diversification"and "concentration" took place together and multiply each other. Less

  • Research Products

    (9 results)

All Other

All Publications (9 results)

  • [Publications] 田中 素香: "ドイツ・マルクの為替媒介通貨化と国際ポートフォリオ投資" 研究年報『経済学』(東北大学). 57・3. 23-26 (1995)

    • Description
      「研究成果報告書概要(和文)」より
  • [Publications] 田中 素香: "EMS(欧州通貨制度)の段階区分と時期区分" 研究年報『経済学』(東北大学). 58・3. 47-58 (1997)

    • Description
      「研究成果報告書概要(和文)」より
  • [Publications] 岩田 健治: "1980年代央以降のEU域内証券取引と投資通貨" 九州経済学会年報. 34. 119-124 (1996)

    • Description
      「研究成果報告書概要(和文)」より
  • [Publications] 田中素香(編著): "EMS:欧州通貨制度-欧州通貨統合の焦点-" 有斐閣, 370 (1996)

    • Description
      「研究成果報告書概要(和文)」より
  • [Publications] 岩田 健治: "欧州の金融統合-EECから域内市場完成まで-" 日本経済評論社, 270 (1996)

    • Description
      「研究成果報告書概要(和文)」より
  • [Publications] Soko TANAKA: "The D.Mark as the European vehicle currency and international portfolio investments" Keizaigaku (economics), Tohoku Univ., Fac.of Economics. Vol.57No.3. 23-36 (1995)

    • Description
      「研究成果報告書概要(欧文)」より
  • [Publications] Kenji IWATA: "The securities transactions in Europe since the middle of 1980s and a concept of investment Currency" Kyushu Keizaigakkai Nenpou. Vol.34. 119-124 (1996)

    • Description
      「研究成果報告書概要(欧文)」より
  • [Publications] Soko TANAKA(ed): The European Monetary System. Yuhikaku Publisher (Tokyo), 370 (1996)

    • Description
      「研究成果報告書概要(欧文)」より
  • [Publications] Kenji IWATA: The Financial Integration in Europe. Nihon Keizai Hyoronsha (Tokyo), 270 (1996)

    • Description
      「研究成果報告書概要(欧文)」より

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Published: 1999-03-09  

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