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Financial Integration of Western Balkan Countries Do Foreign Capitals Matter?

In: Financial Systems Integration of Balkan Countries in the European Financial System: Impact of Global Crisis

Author

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  • Fabienne Bonetto

    (University of Nice-Sophia Antipolis, CEMAFI, France)

  • Irina Syssoyeva-Masson

    (University of Nice-Sophia Antipolis, CEMAFI, France)

Abstract

The impact of international financial integration on economic performance continues to be one of the most debated issues among economists. Theoretical models have identified a number of channels through which financial integration can promote economic development and growth in developing countries and countries in transition. However, in spite of its benefits, financial integration can also be dangerous, as it has been witnessed in many recent financial crises. Therefore, this paper presents potential benefits and costs of financial integration as well as new risks currently threatening Western Balkan countries. Since the composition of capital inflows can also have an influence on the vulnerability of countries to exogenous financial shocks, this paper studies theoretical effects of different types of foreign capital inflows on the host country economy and analyses different patterns of foreign capital inflows received by Western Balkan countries. This paper concludes with some recommendations concerning further integration of these countries into the EU financial system.

Suggested Citation

  • Fabienne Bonetto & Irina Syssoyeva-Masson, 2009. "Financial Integration of Western Balkan Countries Do Foreign Capitals Matter?," Book Chapters, in: Claude Berthomieu & Jean-Paul Guichard & Dejan Eric & Srdjan Redzepagic (ed.), Financial Systems Integration of Balkan Countries in the European Financial System: Impact of Global Crisis, edition 1, volume 1, chapter 7, pages 59-67, Institute of Economic Sciences.
    • Handle: RePEc:ibg:chaptr:finsys-7
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    References listed on IDEAS

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    4. Levine, Ross, 2005. "Finance and Growth: Theory and Evidence," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 12, pages 865-934, Elsevier.
    5. Pierre‐Richard Agénor, 2003. "Benefits and Costs of International Financial Integration: Theory and Facts," The World Economy, Wiley Blackwell, vol. 26(8), pages 1089-1118, August.
    6. Wei, Shang-Jin, 2006. "Connecting two views on financial globalization: Can we make further progress?," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 459-481, December.
    7. Lawrence H. Summers, 2000. "International Financial Crises: Causes, Prevention, and Cures," American Economic Review, American Economic Association, vol. 90(2), pages 1-16, May.
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    Cited by:

    1. Filipe Silva & Carlos Carreira, 2011. "Financial Constraints: Lessons from the Portuguese Monetary Integration," Book Chapters, in: Mirjana Radovic Markovic & Srdjan Redzepagic & João Sousa Andrade & Paulino Teixeira (ed.), Serbia and the European Union: Economic Lessons from the New Member States, edition 1, volume 1, chapter 12, pages 185-199, Institute of Economic Sciences.

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