Assessing cross-border integration of equity markets in the euro area: evidence from a gravity model

Pablo Anaya Longaric, Lisa Bellinghausen, Laura Parisi, Lucia Quaglietti and Fons van Overbeek

Economic Bulletin Boxes, 2026, vol. 3

Abstract: Euro area financial markets hold significant untapped potential: deeper cross-border integration would improve the allocation of savings, lower the cost of capital and strengthen capacity to finance investment and innovation. To assess how the integration of euro area equity markets has evolved over time, this box applies a structural gravity model, the workhorse of international trade analysis, to bilateral euro area equity holdings. The results show that intra-euro area frictions have declined only marginally since 2014, while barriers vis-à-vis the United States have fallen more than twice as fast – a gap that defines the gains that targeted reforms under the savings and investments union could help unlock. JEL Classification: C23, F36, G15, O16

Keywords: Capital Market Union; EU equity markets integration (search for similar items in EconPapers)
Date: 2026-05
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