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Financial Market Integration and Financial Stability

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Abstract

The present study deals with the consequences of Austria's integration into the Common Market and into Economic and Monetary Union for its financial stability. It shows that financial stability has been increased by a more efficient allocation of capital (as a result of intense competition), a higher degree of risk diversification, a reduced probability of asymmetric shocks and enhanced influence on the establishment of a harmonized framework. These positive effects have to some extent been weakened only by the increased risk of cross-border spillover effects and the growing importance of systemically relevant institutions. Setbacks in the earnings of financial institutions brought about by the integration process seem to have been offset at least in part by measures leading to higher cost efficiency. The cooperation of European countries in the regulation and supervision of financial institutions has promoted the positive integration effects of financial stability while weakening those reducing financial stability.

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  • Franz Pauer, 2005. "Financial Market Integration and Financial Stability," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 144-151.
    • Handle: RePEc:onb:oenbmp:y:2005:i:2:b:10
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    References listed on IDEAS

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    1. Inês Cabral & Frank Dierick & Jukka Vesala, 2002. "Banking integration in the euro area," Occasional Paper Series 06, European Central Bank.
    2. Vesala, Jukka & Cabral, Inês & Dierick, Frank, 2002. "Banking integration in the euro area," Occasional Paper Series 6, European Central Bank.
    3. Philipp Hartmann & Angela Maddaloni & Simone Manganelli, 2003. "The Euro-area Financial System: Structure, Integration, and Policy Initiatives," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 19(1), pages 180-213.
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    Cited by:

    1. Jan Babecky & Lubos Komarek & Zlatuse Komarkova, 2013. "Financial Integration at Times of Financial Instability," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 63(1), pages 25-45, March.
    2. Jan Babecky & Alena Bicakova & Alexis Derviz & Tomas Havranek & Roman Horvath & Lubos Komarek & Zlatuse Komarkova & Jakub Mateju & Ke Pang & Renata Pasalicova & Zuzana Prelcova & Marie Rakova & Pierre, 2011. "Macro-Financial Linkages: Theory and Applications," Occasional Publications - Edited Volumes, Czech National Bank, edition 2, volume 9, number rb09/2 edited by Jan Babecky, January.
    3. Motelle, Sephooko & Biekpe, Nicholas, 2015. "Financial integration and stability in the Southern African development community," Journal of Economics and Business, Elsevier, vol. 79(C), pages 100-117.
    4. Dr. Ranjan Dasgupta, 2014. "The Integration of Indian and SAARC Stock Markets – An Empirical Study," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 5(1), pages 09-17, January.
    5. Sanjay Sehgal & Piyush Pandey & Florent Deisting, 2018. "Stock Market Integration Dynamics and its Determinants in the East Asian Economic Community Region," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(2), pages 389-425, June.
    6. Bank for International Settlements, 2008. "Assessing the integration of Asia's equity and bond markets," BIS Papers chapters, in: Bank for International Settlements (ed.), Regional financial integration in Asia: present and future, volume 42, pages 1-37, Bank for International Settlements.

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