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Financial Market Integration in a Monetary Union

  • Claudia M. Buch

Financial markets in Euroland differ from those of a national monetary union in two regards. First, capital markets in general and banking markets in particular show a greater degree of segmentation than national financial markets as a result of information costs and regulatory barriers to full integration. Second, financial market structures differ among the members of Euroland, which potentially affects the transmission of (monetary) shocks. This paper provides a simple model of a currency union which takes these peculiarities into account, focusing on the interaction of financial structures, the degree of capital mobility, the transmission of shocks, and the portfolio choices of banks.

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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1062.

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Length: 47 pages
Date of creation: Jul 2001
Handle: RePEc:kie:kieliw:1062
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