Edited by Yung Chul Park, Takatoshi Ito and Yunjong Wang
Chapter 5: How has the European Monetary Integration Process Contributed to Regional Financial Market Integration?
5. How has the European monetary integration process contributed to regional ﬁnancial market integration? Beate Reszat 1. INTRODUCTION European ﬁnancial market integration has been a stepwise process which is far from completed. Monetary integration has been one important element and driving force in this process, but, as this chapter will demonstrate, not, by far, the only one. Others include the emergence of the euromarkets in the 1950s and 1960s, regional exchange-rate arrangements, individual countries’ ﬁnancial liberalization eﬀorts and the EU Single Market programme. Beside, not all inﬂuences were policy induced. At times, market forces played a decisive role. Experience in Europe has demonstrated that the beneﬁts of ﬁnancial integration are greater for some countries than for others. There were – and still are – considerable diﬀerences between EU member states concerning ﬁnancial systems, structures and institutions, and the question is on which level adjustment and convergence are taking place. The common assumption implicitly or explicitly made in many regional integration debates is that ﬁnancial systems adjust to the highest existing standard. But, of course, other scenarios can be imagined as well. An increasing inward orientation in the region may shift the focus from an overall strive for excellence towards winning market share in lesser developed systems, and the need for compromise in the policy dialogue on integration may water down principles of eﬃciency. The important point here is that the role of monetary integration in diﬀerent scenarios may diﬀer, too. In eliminating currency risks and...
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