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Federal Reserve Bank of St. Louis
Supervisory Policy Analysis Working Papers
Gains from financial integration in the European union: evidence for new and old members
Yuliya Demyanyk
Vadym Volosovych
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.


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Yuliya Demyanyk & Vadym Volosovych, Gains from financial integration in the European union: evidence for new and old members, Federal Reserve Bank of St. Louis, Supervisory Policy Analysis Working Papers 2007-01, 2007.
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Keywords: International finance ; European Union countries
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