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EMU and Capital Markets: Big Bang or Glacier?[Note 1. This contribution draws on joint work with Niels Thygesen ...]
Author(s) -
Gros Daniel
Publication year - 1998
Publication title -
international finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.458
H-Index - 39
eISSN - 1468-2362
pISSN - 1367-0271
DOI - 10.1111/1468-2362.00002
Subject(s) - economics , unification , imperfect , big bang (financial markets) , notice , financial market , point (geometry) , capital market , capital (architecture) , too big to fail , monetary economics , financial system , financial crisis , macroeconomics , finance , political science , philosophy , linguistics , geometry , mathematics , archaeology , computer science , law , history , programming language
EMU is a non‐event from a macroeconomic point of view; financial market regulations will not change and households will barely notice that something has changed on 1 January 1999. In this sense EMU does not constitute a big bang. European financial markets will retain their national characteristics for some time because of the many national regulations (prudential and fiscal) that make assets expressed in euro imperfect substitutes across borders. Moreover, national central banks have a vested interest in preserving local idiosyncrasies, and prudential supervision will also continue to be handled differently from country to country. But these national idiosyncracies cannot forever survive competitive pressures in the euro area. The year 1999 will thus see the beginning of a process of unification of financial markets that will be irresistible in the end, but will take some time to complete.