Moreover, regions with a higher degree of risk sharing are less prone to persistent economic effects of interest rate changes (Chart 3): while output in regions with minimum risk sharing remains around 1.5 percentage points below its initial level five years after a monetary policy tightening shock, it fully recovers over this period in regions with maximum risk sharing.
Chart 3: Impact of monetary policy on regional output when risk sharing is high or low (x-axis: years; y-axis: percentages)  Source: Hauptmeier, Holm-Hadulla and Renault (forthcoming), “Risk sharing and monetary policy transmission”, Working Paper Series, ECB.