NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Country Size, Currency Unions, and International Asset Returns

Tarek Alexander Hassan

NBER Working Paper No. 18057
Issued in May 2012
NBER Program(s):   AP   IFM   ITI

Differences in real interest rates across developed economies are puzzlingly large and persistent. I propose a simple explanation: Bonds issued in the currencies of larger economies are expensive because they insure against shocks that affect a larger fraction of the world economy. I show that differences in the size of economies indeed explain a large fraction of the cross-sectional variation in currency returns. The data also support a number of additional implications of the model: The introduction of a currency union lowers interest rates in participating countries and stocks in the non-traded sector of larger economies pay lower expected returns.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w18057

Published: Tarek A. Hassan, 2013. "Country Size, Currency Unions, and International Asset Returns," Journal of Finance, American Finance Association, vol. 68(6), pages 2269-2308, December.

Users who downloaded this paper also downloaded these:
Bianchi, Boz, and Mendoza w18036 Macro-Prudential Policy in a Fisherian model of Financial Innovation
Aizenman, Jinjarak, Lee, and Park w18028 Developing countries’ financial vulnerability to the euro crisis: An event study of equity and bond markets
Chitu, Eichengreen, and Mehl w18097 When did the dollar overtake sterling as the leading international currency? Evidence from the bond markets
Aghion, Farhi, and Kharroubi w18072 Monetary Policy, Liquidity, and Growth
Levchenko and Zhang w18061 Comparative Advantage and the Welfare Impact of European Integration
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us