ABSTRACT
There are important structural parallels between the new euro area and the US. Both are large monetary areas – in which developments can have repercussions for global financial stability – and are rather closed in the sense that external trade is a small proportion of GDP. There are subsidiary fiscal areas within the overall monetary area; and banking sectors are fragmented and are not generally diversified. Meanwhile, in the wake of EMU, convergence of the euro area financial system with those of the US is widely expected to accelerate (Davis 1999a, 1999b). This will probably result in a more securitised financial system, with bank credit accounting for a smaller proportion of financial claims.
