After all, Eurocurrencies do not just pose a threat to monetary sovereignty; they pose a threat to global financial stability.
Ultimately this would not be a problem if: (1) the market for Eurocurrencies was not so large that it posed systemic risk if it failed, and (2) Eurocurrencies were not completely beyond the control of the Federal Reserve.
1990) (discussing the reasons that Eurocurrencies can lead to inflation).
where SovPI denotes the price index on sovereign bonds from countries denominating Eurocurrencies j and i expressed in numeraire currency j, EurBk is an index measure of bank credit risk for the sets of Eurobanks trading Eurocurrencies i and j, and DomBk is an index measure of bank credit risk for the sets of domestic banks dealing in the CD markets in countries i and j.
Initial examination of the table shows that the t-statistics for all Eurocurrencies are large and significant for both 1-month and 3-month maturities.
This indicates a structural difference and a lack of harmony between the intra-market pair of sovereign/credit risk premia for the two Eurocurrencies.
This study explores the nature of the difference between Eurocurrency and domestic interest rates in the same currency and the difference in rates between two Eurocurrencies.
In general, we find significant structural differences and a lack of harmony between pairs of risk premia for different Eurocurrencies traded within the same Eurocurrency trading center.