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The introduction of the euro had a swift and quantititatively-large impact on the financial markets of the euro area. While the 2007-2008 international financial crises have re-awakened interest in national differences in financial positions, the overall impact has been to sharply reduce home bias in bond markets and in equity portfolios. Although enhanced integration improves international risk sharing, other forces have acted in a counter-vailing fashion. First, financial holdings by euro area investors in the rest of the world have also grown rapidly over the last decade but with heterogeneous patterns of exposure across the member countries. Second, financial integration has also contributed to greater dispersion and persistence in current account positions that has been accompanied by divergence in house price dynamics.
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