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Gains from financial integration in the European Union: Evidence for new and old members


  • Demyanyk, Yuliya
  • Volosovych, Vadym


We estimate the benefits of financial integration resulting from international risk sharing among the 25 EU countries. Under full risk sharing, country-specific output shocks are diversified across the EU members and output volatility of an individual country is not reflected in its consumption. The gains from risk sharing are expressed as the utility equivalent of a permanent increase in consumption. We report positive potential welfare gains for all the EU countries if they move toward full risk sharing. Ten country-members who joined the Union in 2004 would potentially obtain much higher gains than the longer-standing 15 members.

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  • Demyanyk, Yuliya & Volosovych, Vadym, 2008. "Gains from financial integration in the European Union: Evidence for new and old members," Journal of International Money and Finance, Elsevier, vol. 27(2), pages 277-294, March.
  • Handle: RePEc:eee:jimfin:v:27:y:2008:i:2:p:277-294

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    Cited by:

    1. Simplice A, Asongu, 2011. "Globalization, financial crisis and contagion: time-dynamic evidence from financial markets of developing countries," MPRA Paper 30120, University Library of Munich, Germany.
    2. Economidou, Claire & Kool, Clemens, 2009. "European economic integration and (a)symmetry of macroeconomic fluctuations," Economic Modelling, Elsevier, vol. 26(4), pages 778-787, July.
    3. J.-S. Pentecôte & J.-C. Poutineau & F. Rondeau, 2015. "Trade Integration and Business Cycle Synchronization in the EMU: The Negative Effect of New Trade Flows," Open Economies Review, Springer, vol. 26(1), pages 61-79, February.
    4. Simplice A. Asongu, 2012. "The 2011 Japanese earthquake, tsunami and nuclear crisis: Evidence of contagion from international financial markets," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 4(4), pages 340-353, November.
    5. Claudiu T. Albulescu, 2011. "Economic and Financial Integration of CEECs: The Impact of Financial Instability," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 5(1), pages 027-045, March.
    6. Balli, Faruk & Balli, Hatice O., 2011. "Income and consumption smoothing and welfare gains across Pacific Island Countries: The role of remittances and foreign aid," Economic Modelling, Elsevier, vol. 28(4), pages 1642-1649, July.
    7. Sybille Lehwald, 2013. "Has the Euro changed business cycle synchronization? Evidence from the core and the periphery," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 40(4), pages 655-684, November.
    8. Asongu Simplice, 2013. "Globalization and Financial Market Contagion: Evidence from Financial Crisis and Natural Disasters," Working Papers 13/035, African Governance and Development Institute..
    9. Auray, Stéphane & Eyquem, Aurélien & Poutineau, Jean-Christophe, 2010. "The Welfare Gains Of Trade Integration In The European Monetary Union," Macroeconomic Dynamics, Cambridge University Press, vol. 14(05), pages 645-676, November.
    10. Balli, Faruk & Basher, Syed Abul & Jean Louis, Rosmy, 2012. "Risk Sharing in the Middle East and North Africa: The Role of Remittances and Factor Incomes," MPRA Paper 40739, University Library of Munich, Germany.
    11. Faruk, Balli & Eleonora, Pierucci, 2016. "Risk sharing among economic sectors," MPRA Paper 72452, University Library of Munich, Germany.
    12. repec:eee:riibaf:v:42:y:2017:i:c:p:1074-1088 is not listed on IDEAS
    13. Faruk Balli & Eleonora Pierucci, 2015. "Globalization and international risk-sharing: do political and social factors matter more than economic integration?," CAMA Working Papers 2015-04, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    14. repec:pra:mprapa:39629 is not listed on IDEAS

    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles


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