Gains from Financial Integration in the European Union: Evidence for New and Old Members

24 Pages Posted: 3 Jan 2007

See all articles by Yuliya Demyanyk

Yuliya Demyanyk

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Vadym Volosovych

Erasmus University Rotterdam (EUR)

Date Written: December 2006

Abstract

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.

Keywords: EU enlargement, financial integration, welfare gains, risk sharing

JEL Classification: F15, F36, E32

Suggested Citation

Demyanyk, Yuliya and Volosovych, Vadym, Gains from Financial Integration in the European Union: Evidence for New and Old Members (December 2006). Available at SSRN: https://ssrn.com/abstract=954770 or http://dx.doi.org/10.2139/ssrn.954770

Yuliya Demyanyk

Federal Reserve Banks - Federal Reserve Bank of Cleveland

East 6th & Superior
Cleveland, OH 44101-1387
United States

Vadym Volosovych (Contact Author)

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
Room E2-31
3000 DR Rotterdam, 3062PA
Netherlands
+31 10 408 1286 (Phone)
+31 10 408 9165 (Fax)

HOME PAGE: http://https://www.eur.nl/people/vadym-volosovych/

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