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Financial Markets in the Euro Area: Realising the Full Benefits of Integration

Author

Listed:
  • Klaus Regling

    (European Commission)

  • Max Watson

    (Wolfson College)

Abstract

This paper explores the role of financial integration in supporting economic adjustment and convergence under monetary union. It discusses experience since the inception of EMU, based in part on research with a Dynamic Stochastic General Equilibrium (DSGE) model of the euro area. It finds that financial market developments, including declines in risk premia and increases in financial integration, have played a larger role than anticipated when EMU was created. Drawing on this experience, it underscores the importance of well-designed macroeconomic and structural policies in ensuring that the full potential gains of financial integration are tapped, and it links these lessons to the opportunities and challenges facing Cyprus in the immediate aftermath of its adoption of the euro.

Suggested Citation

  • Klaus Regling & Max Watson, 2008. "Financial Markets in the Euro Area: Realising the Full Benefits of Integration," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 2(1), pages 11-24, June.
    • Handle: RePEc:erc:cypepr:v:2:y:2008:i:1:p:11-24
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    File URL: https://www.ucy.ac.cy/erc/documents/Full%20text_Regling.pdf
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    References listed on IDEAS

    as
    1. István P. Székely & Max Watson, 2009. "Growth and Economic Policy: Are There Speed Limits to Real Convergence?," Palgrave Macmillan Books, in: Reiner Martin & Adalbert Winkler (ed.), Real Convergence in Central, Eastern and South-Eastern Europe, chapter 5, pages 98-123, Palgrave Macmillan.
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    Cited by:

    1. Paul J.J. Welfens, 2011. "The Twin Crisis: From the Transatlantic Banking Crisis to the Euro Crisis?," EIIW Discussion paper disbei187, Universitätsbibliothek Wuppertal, University Library.
    2. Paul Welfens, 2011. "From the transatlantic banking crisis to the euro crisis?," International Economics and Economic Policy, Springer, vol. 8(1), pages 15-29, April.

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