Currency Union with and without Banking Union

Vincent Bignon, Régis Breton () and M. Rojas Breu
Authors registered in the RePEc Author Service: Mariana Rojas-Breu

Working papers from Banque de France

Abstract: This paper analyzes a two-country model of currency, banks and endogenous default to study whether impediments to credit market integration across jurisdictions impact the desirability of a currency union. We show that when those impediments induce a higher cost for banks to manage cross-border credit compared to domestic credit, welfare may not be maximal under a regime of currency union. But a banking union that would suppress hurdles to banking integration restores the optimality of that currency arrangement. The empirical and policy implications in terms of banking union are discussed.

Keywords: banks; currency union; credit; default; limited commitment. (search for similar items in EconPapers)
JEL-codes: E42 E50 F3 G21 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2013
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac, nep-mon and nep-opm
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Citations: View citations in EconPapers (6)

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https://publications.banque-france.fr/sites/defaul ... g-paper_450_2013.pdf (application/pdf)

Related works:
Working Paper: Currency Union with and without Banking Union (2018)
Working Paper: Monetary Union with A Single Currency and Imperfect Credit Market Integration (2015)
Working Paper: Monetary Union, Banks and Financial Integration (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:450

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