Risk Sharing in the Euro Zone: the Role of European Institutions
Valentina Milano ()
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Valentina Milano: LUISS "Guido Carli" University
No 1701, Working Papers CELEG from Dipartimento di Economia e Finanza, LUISS Guido Carli
We study risk sharing in the Euro Area (EA) and compare it to the US federation. Using the method of variance decomposition first implemented by Asdrubali et al. (1996), we update and revisit the main channels of risk sharing (net factor income, international transfers and credit markets). We contribute to this literature by splitting the credit market channel into two parts: smoothing achieved through private institutions (markets) and the public sector (national governments and official European institutions). We find that the role played by European institutions (i.e., public lending from the ESFS, ESFM, ESM and the European Commission) has been quite relevant during the recent financial crisis and largely compensated the reduced role of national governments.
Keywords: Risk sharing; Euro Area; European transfers; income insurance; international financial integration. (search for similar items in EconPapers)
JEL-codes: E2 E6 F15 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-fdg, nep-mac and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:lui:celegw:1701
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