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The European Crisis and the Role of the Financial System

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  • Constâncio, Vítor

Abstract

The paper aims to provide a deep rationale for Banking Union in the euro area. It shows that the banking sectors of core and peripheral countries were responsible for financing the credit boom that created the imbalances and vulnerabilities that later were at the centre of the crisis. The increase of debt ratios in the periphery until 2007 was more significant for the private sector than for the public sector. The crisis has been as much a banking crisis as a sovereign debt crisis and to avoid similar future risks a European Supervisor and a Resolution Authority are essential.

Suggested Citation

  • Constâncio, Vítor, 2014. "The European Crisis and the Role of the Financial System," Journal of Macroeconomics, Elsevier, vol. 39(PB), pages 250-259.
    • Handle: RePEc:eee:jmacro:v:39:y:2014:i:pb:p:250-259
    DOI: 10.1016/j.jmacro.2013.08.009
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    References listed on IDEAS

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    1. Markus K. Brunnermeier & Yuliy Sannikov, 2014. "A Macroeconomic Model with a Financial Sector," American Economic Review, American Economic Association, vol. 104(2), pages 379-421, February.
    2. Aoki, Kosuke & Nikolov, Kalin, 2015. "Bubbles, banks and financial stability," Journal of Monetary Economics, Elsevier, vol. 74(C), pages 33-51.
    3. Alter, Adrian & Beyer, Andreas, 2014. "The dynamics of spillover effects during the European sovereign debt turmoil," Journal of Banking & Finance, Elsevier, vol. 42(C), pages 134-153.
    4. Schoenmaker, Dirk, 2011. "The financial trilemma," Economics Letters, Elsevier, vol. 111(1), pages 57-59, April.
    5. Charles A.E. Goodhart & Anil K. Kashyap & Dimitrios P. Tsomocos & Alexandros P. Vardoulakis, 2019. "Financial Regulation In General Equilibrium," Chapters, in: Financial Regulation and Stability, chapter 3, pages 27-77, Edward Elgar Publishing.
    6. Smets, Frank & Collard, Fabrice & Boissay, Frédéric, 2013. "Booms and systemic banking crises," Working Paper Series 1514, European Central Bank.
    7. Alexander Popov & Neeltje van Horen, 2013. "The impact of sovereign debt exposure on bank lending: Evidence from the European debt crisis," DNB Working Papers 382, Netherlands Central Bank, Research Department.
    8. Goodhart, Charles & Kashyap, Anil & Tsomocos, Dimitri & Vardoulakis, Alexandros, 2012. "Financial regulation in general equilibrium," LSE Research Online Documents on Economics 119051, London School of Economics and Political Science, LSE Library.
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    Cited by:

    1. Hartmann, Philipp & Smets, Frank, 2018. "The first twenty years of the European Central Bank: monetary policy," Working Paper Series 2219, European Central Bank.
    2. repec:spo:wpmain:info:hdl:2441/4aoteiu16h99cpn1k5mh5eioj0 is not listed on IDEAS
    3. Hüttl, Pia & Kaldorf, Matthias, 2024. "The transmission of bank liquidity shocks: Evidence from the Eurosystem collateral framework," Discussion Papers 04/2024, Deutsche Bundesbank.
    4. Theodoros S. Papaspyrou, 2015. "EMU 2.0 Drawing Lessons From the Crisis - a New Framework For Stability and Growth," Working Papers 192, Bank of Greece.
    5. Jérôme Creel & Paul Hubert & Fabien Labondance, 2015. "The Intertwining of financialisation and financial instability," SciencePo Working papers Main hal-01157936, HAL.
    6. repec:hal:spmain:info:hdl:2441/4aoteiu16h99cpn1k5mh5eioj0 is not listed on IDEAS
    7. Roberta De Santis & Tatiana Cesaroni, 2016. "Current Account ‘Core–Periphery Dualism’ in the EMU," The World Economy, Wiley Blackwell, vol. 39(10), pages 1514-1538, October.

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    More about this item

    Keywords

    European crisis; Banking Union; Fiscal and macroeconomic imbalances;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G01 - Financial Economics - - General - - - Financial Crises

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