Euro area financial markets hold significant untapped potential: deeper cross-border integration would improve the allocation of savings, lower the cost of capital and strengthen capacity to finance investment and innovation. To assess how the integration of euro area equity markets has evolved over time, this box applies a structural gravity model, the workhorse of international trade analysis, to bilateral euro area equity holdings. The results show that intra-euro area frictions have declined only marginally since 2014, while barriers vis-à-vis the United States have fallen more than twice as fast – a gap that defines the gains that targeted reforms under the savings and investments union could help unlock.
Nothing contributes so much to the prosperity and happiness of a country as high profits