The rhythm of financial development in south-eastern Europe has accelerated. In a setting of low inflation and robust growth, domestic credit and cross-border flows are expanding. This process can strengthen real convergence by supporting productivity gains that enhance competitiveness and a...

This paper explores the role of financial integration in supporting economic adjustment and convergence under monetary union. It discusses experience since the inception of EMU, based in part on research with a Dynamic Stochastic General Equilibrium (DSGE) model of the euro area. It finds that...