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Economic development and cohesion
Economic development and cohesion - Banding together for prosperity
 
“Giving financial policy-makers the research they need to understand the impact of integration on Europe’s financial markets.”
 

The problem

The European Union is one of the most financially integrated regions of the world, thanks in part to the creation of the Eurozone. But this integration is not uniform, for example, the retail-banking sector remains relatively fragmented, as do other financial market sectors. Various EU-level policy initiatives have been launched to promote the further integration of Europe’s financial markets. However, while closer integration can increase economic growth, it can also help propagate financial shocks across borders. Unfortunately, little research exists to help policy-makers understand how these shocks are transmitted.

FINPROP  Understanding shocks to the financial system

Overview:

FINPROP will examine the dynamic of financial shocks by studying the role played by Europe’s banking industry, bond market and equity market.

The research will cover:

  • An analysis of the role of the banking industry in the transmission of shocks
  • An analysis of the extent to which the increase in equity market integration has affected the intensity by which shocks are transmitted
  • An examination of how developments in the equity markets for fast-growing firms differ from general equity market activities
  • An investigation of how monetary and bond market integration has affected interest rates

Contribution to policy development:

  • FINPROP’s results will be valuable to the European Central Bank and national policy-makers charged with managing fiscal policies
  • The research could feed into many policy areas, such as banking supervision and regulation, and bond market regulation
  • Specifically, it will help policy-makers to assess both the benefits and risks involved in integrating Europe’s financial markets

Project deliverables

  • Collecting data on the transmission of financial shocks through international banking activities – March 2005
  • Papers on stock market fluctuations, banking risks, etc. – August 2005
  • Various reports on issues relating to the stock market, monetary unification, the market’s relationship with European economies, and international banking – February 2006
  • Policy conference in Brussels and final report – January and February 2006

Dissemination

  • Project website – from November 2004
  • Publication of findings in various publications, including project participants’ own working paper series, and through the Social Science Research Network – as required
  • Hold an international scientific conference (July 2005), plus two workshops (January 2004 and October 2005), followed by the final policy conference (February 2006)

Technical information

Project acronym: FINPROP
Project’s official full title: Financial Integration in Europe and the Propagation of Shocks
Research priority: 3.1. Underpinning European integration, sustainable development, competitiveness and trade policies (including improved means to assess economic development and cohesion)
Specific webpage: Not yet available
Proposal/contract no: 502642
Start date: 01/11/2004
Kick off meeting: 09/11/2004
Completion date: 31/12/2005
European Commission scientific officer: Ian Perry (ian.perry@ec.europa.eu)

Coordinator:
Name: Klaus Zimmermann, German Institute for Economic Research
Abbreviated name: DIW
Address: Königin-Luise-Straßes
14194 Berlin
Country: Germany
Tel: +49 30 89789 231
Fax: +49 30 89789 200
Website: www.diw.de

Partners

Name: Kiel Institute for World Economics
Abbreviated name: IFW
Country: Germany         

Name: Ghent University
Abbreviated name: GU
Country: Belgium

Name: National Institute for Economic and Social Research
Abbreviated name: NIESR
Country: United Kingdom

 
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