No. 957 - The economic impact of European capital market integration

by Fabrizio Venditti, Michele Caivano, Pietro Cova, Kevin Pallara and Massimiliano Pisani
July 2025
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This paper examines the primary channels through which greater capital market integration in Europe can bolster investment and quantifies its macroeconomic impact using a general equilibrium model.

A more integrated capital market would strengthen investment by reducing the cost of capital (price effect) and by encouraging the entry of investors that are more inclined to finance innovative projects (quality effect). The price effect could raise output by 1.5 per cent over a ten-year horizon. The impact would be three times greater if increased investment were devoted to R&D spending. Through the quality effect, an additional 1.6 per cent increase in GDP could be achieved.

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  1. 28 July 2025
    No. 957 - The economic impact of European capital market integration
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