Towards a more resilient euro area

Esther Gordo and Iván Kataryniuk

Economics and Business Letters, 2019, vol. 8, issue 2, 106-114

Abstract: The euro area has shown lower capacity to resist shocks than other monetary unions, such as the US. One possible determinant is the lack of risk-sharing mechanisms. In this article, we estimate the risk-sharing capacity of the Euro Area according to the Asdrubali et al. (1996) methodology. The results show that the degree of risk-sharing is low in the euro area, in particular, due to underdeveloped capital markets and the lack of a central fiscal capacity. We suggest venues of reform to increase the economic resilience of the common currency area.

Date: 2019
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