EMU and Capital Markets: Big Bang or Glacier?

Daniel Gros

International Finance, 1998, vol. 1, issue 1, 3-34

Abstract: EMU is a non‐event from a macroeconomic point of view; financial market regulations will not change and households will barely notice that something has changed on 1 January 1999. In this sense EMU does not constitute a big bang. European financial markets will retain their national characteristics for some time because of the many national regulations (prudential and fiscal) that make assets expressed in euro imperfect substitutes across borders. Moreover, national central banks have a vested interest in preserving local idiosyncrasies, and prudential supervision will also continue to be handled differently from country to country. But these national idiosyncracies cannot forever survive competitive pressures in the euro area. The year 1999 will thus see the beginning of a process of unification of financial markets that will be irresistible in the end, but will take some time to complete.

Date: 1998
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