Does a Currency Union Need a Capital market Union?
Joseba Martinez,
Markus Sihvonen and
Thomas Philippon
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Thomas Philippon: New York University
No 822, 2019 Meeting Papers from Society for Economic Dynamics
Abstract:
Abstract We study financial linkages and risk sharing in four types of currency unions: segmented markets; a banking union; a capital market union; and complete financial markets. We analyze how these economies respond to various shocks. Broadly speaking, we find that a banking union is efficient at sharing demand shocks (deleveraging, fiscal consolidation), while a capital market union is necessary to share supply shocks (including quality/technology shocks). We present theoretical results where either type of union can exactly replicate the complete market allocation, as well as calibration of welfare gains.
Date: 2019
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Related works:
Journal Article: Does a currency union need a capital market union? (2022)
Working Paper: Does a Currency Union Need a Capital Market Union? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:822
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