DP677 | The Integration of Financial Services and Economic Welfare after `1992'


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This paper uses a computable general-equilibrium model of intertemporal demand to investigate the impact of market integration after 1992 on financial services and economic welfare in the European Community (EC). In contrast to previous work, it assesses the impact of `1992' on the demand for and the allocation of resources in the economy and provides estimates of the effects on borrowers and lenders, sectoral employment and output, international trade in financial services, the balance of payments and economic welfare. The greater scope of the intermediation model in this paper, in addition to providing a greater range of results, suggests that the effects of market integration will be substantially larger than estimated in the Cecchini report, and that the gains (and losses) will differ substantially both within and across economies.