Johannes Fleck, Adrian Monninger, 02 October 2020

Household portfolios in the euro area differ systematically between countries. As a result, ECB policies have asymmetric effects and views on a potential EU financial transaction tax are divergent. This column argues that cross-country variation in portfolio structures is due to variation in country-specific beliefs on social and communal insurance. These beliefs lead to differences in subjective expectations regarding the availability of external support during financial distress. This means that they regulate the extent to which households use their portfolios for self-insurance, as well as their readiness to participate in debt markets.

CEPR Policy Research