Abstract:
The purpose of this paper is analyse the factors that influence conditions in
the Euro-currency market, focusing separately on demand and supply factors.
The paper tentatively concludes that the main reasons for the present
borrowers' market seem to be, first, the turn-round in the US current
account, from a large surplus in 1974-76 to an equally large deficit in
1977-78 and, second, a much narrower (or even reversed) interest rate
spread in the US financial market. The increased aggressiveness of the banks in
their external lending activity seems to have amplified the squeezes on
margins, but the effects of the outside factors seem more important than this
"endogenous" factor.
The views expressed in this publication are those of the authors and do not necessarily reflect the views of the BIS or its member central banks.