In other words, if risk-sharing were to lead to an orderly management of the financial stability consequences derived from risk reduction, risk reduction would proceed at a much faster pace. Moreover, a European deposit insurance scheme would avoid the risk of destabilising self-fulfilling prophecies in the form of bank runs.
In the euro area household portfolios are heavily skewed toward housing, except at the very top tail of the distribution. Correspondingly, Slacalek et al. op. cit. show that the effect of stock market wealth on consumption is limited, even for the non-hand-to-mouth households, also because their marginal propensities to consume out of stock market wealth are very small.