Eurocurrencies allow investors to take a long position in a country's currency without keeping the deposit in that country.
The principle way Eurocurrencies undermine monetary sovereignty is demonstrated by the credit multiplier effect discussed in Part II.D.
Of the five major centers of Eurocurrency transactions, all five either have ways to effectively eliminate reserve requirements on Eurocurrencies or lack such requirements entirely.
The lack of oversight for large-scale, cross-border transactions means instruments like Eurocurrencies are essentially unregulated.
Ironically, Carli attributed a preoccupation with monetary sovereignty as a barrier to solutions to problems caused by Eurocurrencies. (223) After all, an international agreement is a voluntary abrogation of sovereignty and theoretically undermines a country's own ability to set its monetary policy.
Eurobanks making a market in Eurocurrencies establish an interbank offer rate (IBOR) at which they will make loans and an interbank bid rate (IBID) at which they will accept deposits.
Consequently, the IBOR-IBID spread for Eurocurrencies in the interbank market is somewhat of a misnomer.
2) Is the risk premium contained in Eurocurrency rates different for different Eurocurrencies within a single Eurocurrency trading center?
For most Eurocurrencies, we expect ([RP.sub.IBOR,i] - [RP.sub.CD,i]) to be positive.
For a specific Eurocurrency trading center where multiple Eurocurrencies are traded, a difference in the excess risk premia can exist from one Eurocurrency to the other depending upon the countries issuing the underlying currencies and the market's perceptions of their relative risks.