Does a Currency Union Need a Capital Market Union? Risk Sharing via Banks and Markets

Abstract

NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

After the Panic: Are Financial Crises Demand or Supply Shocks? Evidence from International Trade

“…In related workBenigno and Romei (2014) study how debt deleveraging in one country spreads to the rest of the world economy.4The assumption that only patient households receive firm profits is for analytical simplicity and followsMartinez and Philippon (2014).…”

Explaining the Euro crisis: current account imbalances, credit booms and economic policy in different economic paradigms

“…reinforces the potential for financial instability and certainly will not function as a countercyclical 'buffer' against recessions (Reissl and Stockhammer, 2016), the few discussions of CMU which exist from a neoclassically-inspired perspective have largely concurred with the European institutions that CMU will enhance the functioning of the common currency and reduce financial instability (Valiante, 2016;Martinez and Philippon, 2014). However, one can discern an increased concern with the potential effects of CMU on financial stability in some contributions, even though they remain in favour overall (Véron and Wolff, 2015).…”

Common Fiscal Capacity Is Needed to Strengthen Risk Sharing

“…The channels for risk sharing, aside from fi scal transfers, are banking and capital markets integration. Martinez et al (2019) fi nd that a banking union is effi cient in sharing domestic demand shocks, while a capital market union is key to sharing supply shocks. That is, integration should go hand in hand on both fronts.…”