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Financial Asymmetries, Risk Sharing and Growth in The EU

Author

Listed:
  • Cavallaro, Eleonora

    (University of Rome, Sapienza, Department of Economics and Law)

  • Villani, Ilaria

    (Banking Supervision, European Central Bank)

Abstract

This paper proposes an index to benchmark EU financial systems against their potential to enhance resilient growth and international risk sharing. It finds that the risk sharing mechanism is more effective in more stable financial environments, whereas a larger fraction of shocks remains unsmoothed in the lower financial clusters, especially in the aftermath of the global financial crisis, when the credit channel is significantly downsized.

Suggested Citation

  • Cavallaro, Eleonora & Villani, Ilaria, 2024. "Financial Asymmetries, Risk Sharing and Growth in The EU," Single Market Economics Papers WP2024/21, Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (European Commission), Chief Economist Team.
    • Handle: RePEc:bda:wpsmep:wp2024/21
    DOI: 10.2873/420475
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    More about this item

    Keywords

    financial structure; financial heterogeneity; growth; volatility; risk sharing;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G1 - Financial Economics - - General Financial Markets

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