## Economic Integration and Financial Stability: A European Perspective

_IMF Working Papers, December 1, 2006_

## Source details

**Canonical URL:** [Economic Integration and Financial Stability: A European Perspective](https://www.imf.org/en/publications/wp/issues/2016/12/31/economic-integration-and-financial-stability-a-european-perspective-20078)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/31/economic-integration-and-financial-stability-a-european-perspective-20078/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/31/economic-integration-and-financial-stability-a-european-perspective-20078/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/31/economic-integration-and-financial-stability-a-european-perspective-20078/bundle-manifest.json)

## Bibliographic details
- Authors: Gianni De Nicolo, Alexander F. Tieman
- Published: December 1, 2006
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451865561.001

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### Executive summary
- This paper assesses changes in synchronization of real activity and financial market integration in Western Europe and evaluates their implications for financial stability.
- Key high-level conclusions:
  - Increased synchronization of real activity since the early 1980s.
  - Increased equity markets integration since the early 1990s.
  - Measures of systemic risk at large European financial institutions have not declined during the period 1990-2004.
  - Bank systemic risk profiles have converged.
  - The sensitivity of bank and insurance systemic risk measures to common real and financial shocks has increased in most countries.
  - Overall conclusion: the integration process does not necessarily entail an unambiguously positive effect on financial stability.

### Findings on real activity and financial market integration
- Real activity synchronization:
  - Finding: increased synchronization of real activity since the early 1980s.
- Equity markets integration:
  - Finding: increased equity markets integration since the early 1990s.

### Systemic risk measures and dynamics (1990-2004)
- Systemic risk levels:
  - Finding: measures of systemic risk at large European financial institutions have not declined during the period 1990-2004.
- Convergence:
  - Finding: bank systemic risk profiles have converged.
- Sensitivity to common shocks:
  - Finding: the sensitivity of bank and insurance systemic risk measures to common real and financial shocks has increased in most countries.

### Implications for financial stability and policy-relevant insights
- Integration and stability:
  - Insight: increased economic and financial integration does not guarantee improved financial stability; effects are not unambiguously positive.
- Risk interdependency:
  - Insight: rising synchronization and market integration, together with converging bank risk profiles and greater sensitivity to common shocks, increase interdependency of risks across institutions and countries.

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## Content in this bundle

- **3.         Insurance         DDs**
  - [3.         Insurance         DDs (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2006/_wp06296.pdf.md){rel="alternate" type="text/markdown"}
  - [3.         Insurance         DDs (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2006/_wp06296.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/economic-integration-and-financial-stability-a-european-perspective-20078_