The Implications of Economic Integration for Financial Stability: A European Perspective

LAW AND ECONOMICS OF RISK IN FINANCE, Peter Nobel and Marina Gets, eds., pp. 95-100, Schulthess, Zürich, 2007

U. of St. Gallen Law & Economics Working Paper No. 2008-17

7 Pages Posted: 28 May 2008 Last revised: 7 Aug 2008

See all articles by Gianni De Nicolo

Gianni De Nicolo

Johns Hopkins University - Carey Business School; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: June 1, 2007

Abstract

Countries in Western Europe have experienced increased synchronization of real activity since the early 1980s and increased financial integration since the early 1990s. What are the implications of this increased economic integration for financial stability? Measures of systemic risk at large European financial institutions indicate that risks to financial stability have not declined during the period 1990-2004, and that bank systemic risk profiles have become more similar.

At the same time, the sensitivity of bank systemic risk measures to common real and financial shocks has increased in most countries. Overall, these results suggest that the integration process does not necessarily entail an unambiguously positive effect on financial stability.

Keywords: financial integration, financial risk management, financial institutions, financial stability

JEL Classification: K22, G10, G21

Suggested Citation

De Nicolo, Gianni, The Implications of Economic Integration for Financial Stability: A European Perspective (June 1, 2007). U. of St. Gallen Law & Economics Working Paper No. 2008-17; U. of St. Gallen Law & Economics Working Paper No. 2008-17. Available at SSRN: https://ssrn.com/abstract=1138202 or http://dx.doi.org/10.2139/ssrn.1138202

Gianni De Nicolo (Contact Author)

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States
(410) 234-4507 (Phone)

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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