Advertisement

Swiss Journal of Economics and Statistics

, Volume 152, Issue 4, pp 319–329 | Cite as

Capital Markets Union in Europe: Why Other Unions Must Lead the Way

  • Viral V. AcharyaEmail author
  • Sascha Steffen
Open Access
Article

Summary

Government bond markets in the Euro Area are highly fragmented causing further fragmentation in bond and equity markets. Capital Markets Union with fully integrated capital markets across member countries can only work when the status of member country sovereign bonds as risk-free assets is restored. Banking Union and fiscal union are both required for this outcome. However, the Banking Union remains an unfinished project without an European deposit insurance framework and there is little consensus at the moment for a fiscal union in the Euro Area. It appears thus that the fate of the Capital Markets Union solely rests with the European Central Bank in the near to medium term.

Keyword

Capital Markets Union financial market integration sovereign risk 

JEL-Classification

G01 G15 F34 

References

  1. Acharya, V., I. Drechsler, and P. Schnabl (2014), “A Pyrrhic Victory? Bank Bailouts and Sovereign Credit Risk”, Journal of Finance 69(6), pp. 2689–2739.CrossRefGoogle Scholar
  2. Acharya, V., B. Imbierowicz, S. Steffen, and D. Teichmann (2015), “Does Lack of Financial Stability Impair the Transmission of Monetary Policy?”, working paperGoogle Scholar
  3. Acharya, V., D. Pierret, and S. Steffen (2016), “Lender of Last Resort versus Buyer of Last Resort — The Impact of the European Central Bank Actions on the Bank-Sovereign Nexus”, working paper.Google Scholar
  4. Acharya, V., and S. Steffen (2014a), “Falling Short of Expectations — Stress Testing the Eurozone Banking System”, working paper, NYU Stern School of BusinessGoogle Scholar
  5. Acharya, V., and S. Steffen (2014b), “Benchmarking the European Central Bank’s Asset Quality Review and Stress Test — A Tale of Two Leverage Ratios”, NYU Stern School of Business.Google Scholar
  6. Acharya, V., and S. Steffen (2015), “The ‘Greatest’ Carry Trade Ever? Understanding Eurozone Bank Risks”, Journal of Financial Economics 115(2), pp. 215–236.CrossRefGoogle Scholar
  7. Alemeida, H., I. Cunha, M. A. Ferreira, and F. Restrepo (2016), “The Real Effects of Credit Ratings: The Sovereign Ceiling Channel”, Journal of Finance (forthcoming)Google Scholar
  8. Becker, B. and V. Ivashina (2015), “Financial Repression in the European Sovereign Debt Crisis”, working paper.Google Scholar
  9. Brunnermeier, M., L. Garicano, P. R. Lane, M. Pagano, R. Reis, T. Santos, D. Thesmar, S. Van Nieuwerburgh and D. Vayanos (2011), “European Safe Bonds (ESBies)”, working paper.Google Scholar
  10. Buch, C. M., M. Koetter, and J. Ohls (2014), “Banks and Sovereign Risk: A Granular View”, Deutsche Bundesbank Discussion Papers 29.Google Scholar
  11. Crosignani, M. (2015), “Why Are Banks not Recapitalized During Crises?”, Onb Working Paper no. 203.Google Scholar
  12. EC (2015), Quarterly Report on the Euro Area, Volume 14, No. 4, European Commission, Directorate-General for Economic and Financial Affairs.Google Scholar
  13. Krishnamurthy, A., S. Nagel, and A. Vissing-Jorgensen (2015), “ECB Policies Involving Government Bond Purchases: Impact and channels”, working paperGoogle Scholar

Copyright information

© Swiss Society of Economics and Statistics 2016

Authors and Affiliations

  1. 1.Department of FinanceNew York University, Stern School of BusinessNew YorkUSA
  2. 2.Area of Banking, Finance and Insurance, and Centre for European Economic Research (ZEW)University of MannheimMannheimGermany

Personalised recommendations