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Capital Markets Union and International Risk-Sharing

In: Crisis after the Crisis: Economic Development in the New Normal

Author

Listed:
  • Ada Cristina Marinescu

    (National Institute for Economic Research
    School of Advanced Studies of the Romanian Academy, Department of Economic, Social and Juridical Sciences)

  • Adela Simona Popescu (Vlășceanu)

    (Social and Juridical Sciences)

  • Lavinia-Florența Puiu

    (Social and Juridical Sciences)

Abstract

A currency union limits the ability of the member states to stabilise output shocks through exchange rate adjustments or resort to monetary policy interventions. Therefore, it is important to mitigate adverse output shocks which could affect consumption patterns through private or public risk-sharing channels. We study in this paper the difference between the core and periphery eurozone member countries regarding the reaction to GDP fluctuations, especially during downturns. Implementing a Capital Markets Union could play an important role in ensuring protection against output shocks through enhancing cross-border financial flows. We intend to show that since the launch of the euro, the degree of private risk-sharing has substantially increased within the euro area. Also, further capital markets integration could help reduce the effect of idiosyncratic shocks on output. Our results show that a functional Capital Markets Integration is a prerequisite for greater risk-sharing in European Monetary Union.

Suggested Citation

  • Ada Cristina Marinescu & Adela Simona Popescu (Vlășceanu) & Lavinia-Florența Puiu, 2023. "Capital Markets Union and International Risk-Sharing," Springer Proceedings in Business and Economics, in: Luminita Chivu & Ignacio De Los Ríos Carmenado & Jean Vasile Andrei (ed.), Crisis after the Crisis: Economic Development in the New Normal, chapter 0, pages 69-77, Springer.
    • Handle: RePEc:spr:prbchp:978-3-031-30996-0_5
    DOI: 10.1007/978-3-031-30996-0_5
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