Martinez, J, Philippon, T and Sihvonen, M (2022) Does a currency union need a capital market union? Journal of International Economics. ISSN 0022-1996 (In Press)
Abstract
We compare risk sharing in response to demand and supply shocks in four types of currency unions: segmented markets; a money market union; a capital market union; and complete financial markets. We show that a money market union is efficient at sharing domestic demand shocks (deleveraging, fiscal consolidation), while a capital market union is necessary to share supply shocks (productivity and quality shocks). In a numerical exercise, we find that the welfare gain of moving from segmented markets to a money market union is of roughly similar magnitude to that of moving from a money market to a capital market union.
More Details
Item Type: | Article |
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Subject Areas: | Economics |
Date Deposited: | 04 Oct 2022 11:19 |
Date of first compliant deposit: | 04 Oct 2022 |
Last Modified: | 05 Nov 2024 02:51 |
URI: | https://lbsresearch.london.edu/id/eprint/2675 |