Currency management costs

European Union

Description

Intra-Community trade - free movement of goods
Commercial policy

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• Publié par: EUROPEAN-UNION
• Nombre de lectures: 12
• EAN13: 928278794
• Langue: English
• Poids de l'ouvrage: 9 Mo

Extrait

Th e Si rig le 2U<JL J~Æ et Re ν ¿e Φ
SUBSERIES III: DISMANTLING [•]m:r±iNNi3tt
Volume 6: The Single Market Review
IMPACT ON SERVICES
CURRENCY MANAGEMENT
COSTS This report is part of a series of 39 studies commissioned from independent consultants in the
context of a major review of the Single Market. The 1996 Single Market Review responds to
a 1992 Council of Ministers Resolution calling on the European Commission to present an
overall analysis of the effectiveness of measures taken in creating the Single Market. This
review, which assesses the progress made in implementing the Single Market Programme,
was coordinated by the Directorate-General 'Internal Market and Financial Services'
(DG XV) and thel 'Economic and Financial Affairs' (DGII) of the
European Commission.
This document was prepared for the European Commission
by
IFO Institute
It does not, however, express the Commission's official views. Whilst every reasonable effort
has been made to provide accurate information in regard to the subject matter covered, the
Consultants are not responsible for any remaining errors. All recommendations are made by
the Consultants for the purpose of discussion. Neither the Commission nor the Consultants
accept liability for the consequences of actions taken on the basis of the information
contained herein.
The European Commission would like to express thanks to the external experts and
representatives of firms and industry bodies for their contribution to the 1996 Single Market
Review, and to this report in particular.
© European Communities, 1998
No part of this book may be reproduced, stored in a retrieval system, or transmitted in any
form or by any means, electronic, mechanical, photocopying, recording or otherwise without
written permission from the copyright holder.
Office for Official Publications of the European Communities
2 rue Mercier, L-2985 Luxembourg
ISBN 92-827-8794-X Catalogue number: C1 -69-96-006-EN-C
Kogan Page . Earthscan
120 Pentonville Road, London NI 9JN
ISBN 0 7494 2329 3 EUROPEAN COMMISSION
The S ίη.& le Jklurfcet Review
DISMANTLING OF BARRIERS
CURRENCY MANAGEMENT
COSTS
The Single 2Mia.rtc.et Review
SUBSERIES III: VOLUME 6
OFFICE FOR OFFICIAL PUBLICATIONS
OF THE EUROPEAN COMMUNITIES
KOGAN PAGE . EARTHSCAN The Single Market Review series
Subseries I — Impact on manufacturing
Volume: 1 Food, drink and tobacco processing machinery
2 Pharmaceutical products
3Textiles and clothing
4 Construction site equipment
5Chemicals
6 Motor vehicles
7 Processed foodstuffs
8 Telecommunications equipment
Subseries II — Impact on services
Volume: 1 Insurance
2 Air transport
3 Credit institutions and banking
4Distribution
5 Road freighttransport
6 Telecommunications: liberalized services
7 Advertising
8Audio-visual services and production
9 Single information market
10 Single energy market
11 Transport networks
Subseries III —Dismantling of barriers
Volume: 1 Technical barriers to trade
2 Public procurement
3Customs and fiscal formalities at frontiers
4 Industrial property rights
5Capital market liberalization
6 Currency management costs
Subseries IV ■ Impact on trade and investment
Volume: 1 Foreign direct investment
2 Trade patterns inside the single market
3 Trade creation and trade diversion
4 External access to European markets
Subseries V — Impact on competition and scale effects
Volume: 1 Price competition and price convergence
2 Intangible investments
3 Competition issues
4 Economies of scale
Subseries VI — Aggregate and regional impact
Volume: 1 Regional growth and convergence
2 The cases of Greece, Spain, Ireland and Portugal
3 Trade, labour and capital flows: the less developed regions
4 Employment, trade and labour costs in manufacturing
5Aggregate results of the single market programme
Results of the business survey Table of contents
Table of contents
List of tables xi
List of figures xii
List of abbreviations xiv
Acknowledgements
Part One: Analysis and Synthesis 1
1. Summary
2. Methodological approach 9
2.1. Overview
2.2. The questionnaire
2.2.1. Theoretical background of the questionnaire 10
2.2.2. Sample of the survey 11
2.2.3. Evaluation methods3
3. Evolution of foreign exchange flows5
3.1. Total volume of foreign exchange and breakdown according to individual
currencies and trading centres
3.1.1. Volume of foreign exchange
3.1.2. Filtering out the intra-EU transactions 20
3.2. Volume of foreign exchange and breakdown according to market players 21
3.2.1 No general exclusion of interbank transactions2
3.2.2 A breakdown in interbank and customer business3
3.2.3 Significance of different market players4
3.3. Volume of foreign exchange and breakdown according to market segments 25
3.4.e ofne between non-banks and breakdown according
to transaction size and type 26
3.4.1. Transaction size categories in non-bank trading 2
3.4.2.n types in non-bank trading7
3.5. Total foreign exchange volume of non-banks, current account transactions
and capital account transactions9
4. Costs of foreign exchange transactions 31
4.1. Interbank trading 3
4.1.1. Exchange unit costs in interbank trading
4.1.2. Level of transaction costs of interbank business3
4.2. Foreign exchange trade of non-banks4
4.2.1. Non-bank transactions - except for cash tradeCurrency management costs
4.2.2. Cash trade 40
4.2.3. Level of transaction costs for cash trade 41
4.2.4. Company internal costs2
4.3. Adding the costs5
5. The impact of the single market on the costs of foreign exchange transactions 5
5.1. Introduction 5
5.2. Single market measures which affect foreign exchange conversion costs and
unit costs of foreign exchange transactions 5
5.2.1. Banking law
5.2.2. Payment systems3
5.2.3. Capital movements4
5.2.4. Hypotheses on the effects of the single market on unit costs and foreign
exchange turnover5
5.3. The antimonde6
5.3.1. The impact of the single market, globalization of capital markets and
ERM crisis on foreign exchange transaction costs since the late 1980s 57
5.4. Currency volatility8
5.5. Capital market imperfections 60
5.6. Empirical analysis of intercountry differences2
5.6.1. Bank charges and commissions
5.6.2. Costs for personnel and equipment3
5.6.3. Hedging costs
5.6.4. Delays in bank transfers
5.7. Conclusions9
6. Survey of the literature of foreign exchange volatility and risk and
their effect on corporate strategies, trade and investment 7
6.1. Problems of risk measurement 7
6.1.1. Introduction3
6.1.2. Recent trends in financial volatility and risk analysis4
6.2. Volatility and risk and companies' risk-averting strategies: theoretical
background5
6.3. Evaluation of existing empirical literature8
6.3.1. Impact on trade
6.3.2.t on traded goods prices 84
6.3.3. Impact on direct investment 5
6.4. Conclusions 8
7. Evaluation of the questionnaires and company interviews: intercountry
comparisons of company strategies7
7.1. Introduction
7.2. Volatility differences
7.2.1. Importance of time periods of exchange rate fluctuations which prompt
business strategies
7.2.2.e of different currencies to company strategy 88
7.3. Corporate hedging strategies
7.3.1. Realg measures 89 Table of contents
7.3.2. Financial hedging strategies 94
7.3.3. Determinants of the choice of hedging instruments 9
7.3.4. In-house measures5
7.4. Changes in business strategies6
7.5. Summary 97
Appendix A: Questionnaire for EU project 'Costs of managing multiple currencies
in the EU'9
Appendix B: 10
Excursus 1: Methodology of'filtering out' the foreign exchange volume
between EU currencies from total volume of foreigne 105
Excursus 2: Checking the share calculations 107 s 3 : Separate calculation of exchanging notes and coins from bottom-up 110
Appendix C : 113
Excursus 1 : Calculating fees and other bank charges as well as other foreign
exchange administration cost blocks with the IFO questionnaire of winter 1995 11
Excursus 2: Survey of assumptions4
Appendix D: Regression analysis of inter-firm variances 115
D.I. Bank charges6
D.2. Personnel costs 117
D.3. Hedging costs8
Appendix E: Currency volatility of six EU currencies 125
Tables 12
Figures 131
Appendix F: The measurement of volatility and risk in recent financial literature 13
Part Two: Country Reports of Mail Surveys and Case Studies: Country Tables 141
I. Country report I: Germany 141
1.1. Evaluation of the questionnaire
1.1.1. Representativity of the responding firms 14
1.1.2. Characteristics of responding
1.1.3. Exchange rate fluctuations in Europe and business strategies4
1.1.4. Protection against exchange rate risk6
1.1.5. Transaction costs and costs of hedging7
Appendix IA. German tables 154
1.2. Evaluation of the interviews in Germany 18
1.2.1. General comments
1.2.2. InternationalizationCurrency management costs
1.2.3. Company strategies in response to