Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/121434
Authors: 
Belke, Ansgar
Gros, Daniel
Year of Publication: 
2015
Series/Report no.: 
ROME Discussion Paper Series 15-02
Abstract: 
This study investigates the shock-absorbing properties of a banking union by providing a detailed comparison between the way regional financial shocks have been absorbed at the federal level in the US, but have led to severe regional (national) financial dislocation and tensions in Europe and particularly in the euro area. The institutions of the banking union, which is now emerging in the euro area, should increase its capacity to deal with future regional boom and bust cycles. Cross-border capital flows in the form of equity appear to be much more stable than those taking the form of credit, especially inter-bank credit. It therefore follows that cross-border banks would be useful to deal with regional shocks. But large banks pose the 'too big to fail' problem and they would also propagate regional shocks, especially if they originate in large countries, to the entire area. The extent to which the (incomplete) banking union now put in place for the euro area provides some shock absorption is also discussed.
Subjects: 
banking union
currency union
default
shock absorber
two-tier reinsurance system
JEL: 
E42
E50
F3
G21
Document Type: 
Working Paper

Files in This Item:
File
Size
482.36 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.