Does a Currency Union Need a Capital Market Union?
Thomas Philippon () and
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Joseba Martinez: New York University
No 501, 2015 Meeting Papers from Society for Economic Dynamics
We study financial linkages and risk sharing in the context of the Eurozone crisis. We consider four types of currency unions: a currency union with (potentially) segmented markets; a banking union; a capital market union; and a currency union with complete financial markets. We then analyze how these economies respond to deleveraging shocks and to technology shocks. We find that a banking union is enough to deal with public and private deleveraging shocks, but a capital market union is necessary to approximate the complete market allocation when there are shocks that affect productivity or the terms of trade
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed015:501
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