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Gains from financial integration in the European union: evidence for new and old members

  • Yuliya Demyanyk
  • Vadym Volosovych

We estimate potential welfare gains from financial integration and corresponding better insurance against country-specific shocks to output (risk sharing) for the twenty-five European Union countries. Using theoretical utility-based measures we express the gains from risk sharing 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 have more volatile or counter-cyclical consumption and output and would obtain much higher potential gains than the longer-standing fifteen members.

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Paper provided by Federal Reserve Bank of St. Louis in its series Supervisory Policy Analysis Working Papers with number 2007-01.

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Date of creation: 2007
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Handle: RePEc:fip:fedlsp:2007-01
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