Financial Market Integration under EMU

Tullio Jappelli () and Marco Pagano

No 312, European Economy - Economic Papers 2008 - 2015 from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: The European Monetary Union (EMU) has been the single most important policy-induced innovation in the international financial system since the collapse of the Bretton-Woods system. By eliminating exchange rate risk, EMU has eliminated a key obstacle to financial integration. But while a single currency is a necessary condition for the emergence of pan-European capital markets, it is not a sufficient one. Other frictions may still stand in the way of full integration: persistent differences in regulations applying to financial intermediaries, tax treatment, standard contractual clauses and business conventions, issuance policy, security trading systems, settlement systems, availability of information, and judicial enforcement may still segment financial markets along national borders. In the process that preceded and accompanied the introduction of the euro, however, monetary unification triggered a sequence of policy actions and private sector responses that swept aside many other regulatory barriers to financial integration. To what extent has this process of regulatory reform led to actual financial integration? And if European financial markets have actually become more integrated, to what extent have these changes spurred growth and investment in Europe? Will financial integration affect also the ability of households to shoulder risks, or the ability of European economies to adjust to macroeconomic shocks? Which policy lessons can we draw for the future of European financial markets?

Keywords: 978-92-79-08237-5; Jappelli; Pagano; euro area; financial markets; financial integration; EMU (search for similar items in EconPapers)
JEL-codes: E44 F36 F43 G15 G18 G28 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2008-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (48)

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Related works:
Working Paper: Financial Market Integration Under EMU (2008)
Working Paper: Financial Market Integration Under EMU (2008)
Working Paper: Financial market integration under EMU (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:euf:ecopap:0312

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