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The Fundamental Determinants of Financial Integration in the European Union

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  • Lemmen, J.J.G.

    (Tilburg University)

  • Eijffinger, S.C.W.

    (Tilburg University)

Abstract

This paper focuses on the fundamental determinants of the degree of financial integration in the European Union over the period 1973-1993. Using closed interest differentials to measure the intensity of capital controls and applying a panel data approach, we find realized inflation rates, government deficits, current account deficits and credits to the domestic economy to be significantly positively correlated with the intensity of capital export restrictions. In addition, low productivity in the business sector and low availability of sophisticated deposit instruments are positively related to the intensity of capital export controls. Consequently, remaining differences in national economic and financial structures, should be of greater interest to policymakers.

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Bibliographic Info

Paper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-73027.

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Date of creation: 1996
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Publication status: Published in Weltwirtschaftliches Archiv (1996) v.132, p.432-456
Handle: RePEc:ner:tilbur:urn:nbn:nl:ui:12-73027

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Web page: http://www.tilburguniversity.edu/

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  1. Eijffinger, Sylvester & van Rooij, Maarten & Schaling, Eric, 1996. " Central Bank Independence: A Paneldata Approach," Public Choice, Springer, Springer, vol. 89(1-2), pages 163-82, October.
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  5. Eijffinger, S.C.W., 1995. "The quantity approach to financial integration: The Feldstein-Horioka criterion revisited," Open Access publications from Tilburg University, Tilburg University urn:nbn:nl:ui:12-152913, Tilburg University.
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Citations

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Cited by:
  1. Harry P. Huizinga & Jan J.G. Lemmen & Sylvester C.W. Eijffinger, 1997. "Short-Term and Long-Term Government Debt and Nonresident Interest Withholding Taxes," FMG Discussion Papers, Financial Markets Group dp275, Financial Markets Group.
  2. Sweta Saxena & Kar-yiu Wong, 1999. "Currency Crises and Capital Control: A Survey," Discussion Papers in Economics at the University of Washington, Department of Economics at the University of Washington 0045, Department of Economics at the University of Washington.
  3. Pérez García Francisco & Tortosa-Ausina Emili & Arribas Fernández Iván, 2009. "The Determinants of International Financial Integration Revisited: The Role of Networks and Geographic Neutrality," Working Papers, Fundacion BBVA / BBVA Foundation 201049, Fundacion BBVA / BBVA Foundation.
  4. Krogstrup, Signe, 2002. "Public debt asymmetries: the effect on taxes and spending in the European Union," Working Paper Series, European Central Bank 0162, European Central Bank.
  5. Jochem, Axel & Herrmann, Sabine, 2003. "The international integration of money markets in the central and east European accession countries: deviations from covered interest parity, capital controls and inefficiencies in the financial secto," Discussion Paper Series 1: Economic Studies 2003,07, Deutsche Bundesbank, Research Centre.
  6. Helge Berger & Jan-Egbert Sturm & Jakob de Haan, 2001. "Capital Controls and Exchange Rate Regimes: An Empirical Investigation," CESifo Working Paper Series 433, CESifo Group Munich.
  7. Marina Emiris, 2002. "Measuring capital market integration," BIS Papers chapters, Bank for International Settlements, in: Bank for International Settlements (ed.), Market functioning and central bank policy, volume 12, pages 200-221 Bank for International Settlements.
  8. Vo, Xuan Vinh & Daly, Kevin James, 2007. "The determinants of international financial integration," Global Finance Journal, Elsevier, vol. 18(2), pages 228-250.
  9. Herrmann, Sabine & Jochem, Axel, 2003. "Die internationale Integration der Geldmärkte in den mittel- und osteuropäischen Beitrittsländern: Abweichungen von der gedeckten Zinsparität, Kapitalverkehrskontrollen und Ineffizienzen des Finan," Discussion Paper Series 1: Economic Studies 2003,07, Deutsche Bundesbank, Research Centre.

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