Financial integration and financial development in transition economies: What happens during financial crises? (original) (raw)
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2020
This paper explores the relationship between international financial integration (IFI), external vulnerability and economic growth. It proposes a taxonomy of typical IFI profiles and applies it to a sample of 90 developing and emerging economies (DEEs) for the 1992-2016 period using a dynamic panel data model. Drawing from a Keynesian and Structuralist analytical framework, it considers that what matters for economic growth is much less the quantitative degree of IFI per se but rather the profile, or “quality”, of this integration. The results suggest that DEEs which succeed in integrating into global financial markets under a more balanced and autonomous profile can experience economic growth benefits, while a more financially dependent and vulnerable profile exacerbates the risks of financial globalisation, undermining growth in the long run. Moreover, the growth path in the latter tends to be more affected by external financial shocks, even though systemic shocks also impact the ...
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2010
Using industry-level data, this paper shows that the European transition region benefited much more strongly from financial integration in terms of economic growth than other developing countries in the years preceding the current crisis. We analyze several factors that may explain this finding: financial development, institutional quality, trade integration, political integration, and financial integration itself. The explanation that stands out is political integration. Within the group of transition countries, the effect of financial integration is strongest for countries that are politically closest to the EU. This suggests that political and financial integration are complementary and that political integration can considerably increase the benefits of financial integration.
The Impact of the Financial Crisis on Financial Integration, Growth and Investment
National Institute Economic Review, 2012
Financial crises, and in particular those of the past few years, have severe consequences for the affected economies. In this paper we analyse the impact of financial development and European financial integration on growth and we find no reversal of the growth benefits of financial development and integration in recent years. This highlights the economic cost of regulatory changes that would reverse European financial integration. We also find that, following a financial crisis, investment declines more in countries with a greater degree of uncertainty aversion, which can be informative for evaluating post-crisis economic performance.