Capital Markets Union and International Risk-Sharing

Ada Albu (Marinescu), Adela Simona Popescu (Vlășceanu) and Lavinia-Florența Puiu
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Adela Simona Popescu (Vlășceanu): Social and Juridical Sciences
Lavinia-Florența Puiu: Social and Juridical Sciences

Chapter Chapter 5 in Crisis after the Crisis: Economic Development in the New Normal, 2023, pp 69-77 from Springer

Abstract: Abstract A currency union limits the ability of the member states to stabilise output shocks through exchange rate adjustments or resort to monetary policy interventions. Therefore, it is important to mitigate adverse output shocks which could affect consumption patterns through private or public risk-sharing channels. We study in this paper the difference between the core and periphery eurozone member countries regarding the reaction to GDP fluctuations, especially during downturns. Implementing a Capital Markets Union could play an important role in ensuring protection against output shocks through enhancing cross-border financial flows. We intend to show that since the launch of the euro, the degree of private risk-sharing has substantially increased within the euro area. Also, further capital markets integration could help reduce the effect of idiosyncratic shocks on output. Our results show that a functional Capital Markets Integration is a prerequisite for greater risk-sharing in European Monetary Union.

Keywords: Risk-sharing; Consumption smoothing; Capital Markets Union (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-031-30996-0_5

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DOI: 10.1007/978-3-031-30996-0_5

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