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Financial Liberalization and Business Cycles: The Experience of Future EU Member States in the Baltics and Central Eastern Europe

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  • Lucio Vinhas de Souza

    (Kiel Institute for World Economics IfW)

Abstract

This paper extends the work of Kaminsky and Schmukler (2003) to the Baltic and Central Eastern European future Member States of the European Union, to test if the same short-run increase in cyclical volatility arising from financial integration is observed in this specific sample of “emerging markets”. This work finds signs that, contrary to other emerging markets, this does not happen: for the future Member States, financial integration, similarly to the outcome observed in mature market economies, reduces cyclical volatility both in the short and in the long run. Weak indications are found that this may happen partially due to the anchoring of expectations provided by the EU Accession, and to the more robust institutional framework imposed by this process onto the countries in question.

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Bibliographic Info

Paper provided by EconWPA in its series International Finance with number 0403009.

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Length: 38 pages
Date of creation: 25 Mar 2004
Date of revision:
Handle: RePEc:wpa:wuwpif:0403009

Note: Type of Document - pdf; pages: 38
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Web page: http://128.118.178.162

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Keywords: Enlargement; European Union; financial liberalization; booms; busts; cycles; volatility.;

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  1. Ian Domowitz & Jack Glen & Ananth Madhavan, 2000. "Liquidity, Volatility, and Equity Trading Costs Across Countries and Over Time," William Davidson Institute Working Papers Series 322, William Davidson Institute at the University of Michigan.
  2. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," IMF Working Papers 00/30, International Monetary Fund.
  3. Thomas Reininger & Franz Schardax & Martin Summer, 2002. "Financial System Transition in Central Europe: The First Decades," SUERF Studies, SUERF - The European Money and Finance Forum, number 16 edited by Morten Balling.
  4. Ross Levine, 2002. "Bank-Based or Market-Based Financial Systems: Which is Better?," NBER Working Papers 9138, National Bureau of Economic Research, Inc.
  5. Garry J. Schinasi, 2003. "Responsibility of Central Banks for Stability in Financial Markets," IMF Working Papers 03/121, International Monetary Fund.
  6. Assaf Razin & Andrew Rose, 1992. "Business Cycle Volatility and Openness: An Exploratory Cross-Section Analysis," NBER Working Papers 4208, National Bureau of Economic Research, Inc.
  7. Fleming, Alex & Lily Chu & Bakker, Marie-Renee, 1996. "The Baltics - Banking crises observed," Policy Research Working Paper Series 1647, The World Bank.
  8. International Monetary Fund, 2003. "Managing Risks in Financial Market Development," IMF Working Papers 03/116, International Monetary Fund.
  9. M. Ayhan Kose & Marco Terrones & Eswar Prasad, 2003. "Volatility and Comovement in a Globalized World Economy," IMF Working Papers 03/246, International Monetary Fund.
  10. Utpal Bhattacharya & Hazem Daouk, 2002. "The World Price of Insider Trading," Journal of Finance, American Finance Association, vol. 57(1), pages 75-108, 02.
  11. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," NBER Working Papers 7664, National Bureau of Economic Research, Inc.
  12. Reinhart, Carmen & Tokatlidis, Ioannis, 2005. "Before and After Financial Liberalization," MPRA Paper 6986, University Library of Munich, Germany.
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Cited by:
  1. Vinhas de Souza, Lúcio & Schweickert, Rainer & Movchan, Veronika & Bilan, Olena & Burakovsky, Igor, 2005. "Now so near, and yet still so far: economic relations between Ukraine and the European Union," Kiel Discussion Papers 419, Kiel Institute for the World Economy (IfW).
  2. de la Torre, Augusto & Gozzi, Juan Carlos & Schmukler, Sergio L., 2007. "Stock market development under globalization: Whither the gains from reforms?," Journal of Banking & Finance, Elsevier, vol. 31(6), pages 1731-1754, June.
  3. Claessens, Stijn & Schmukler, Sergio L., 2007. "International financial integration through equity markets: Which firms from which countries go global?," Journal of International Money and Finance, Elsevier, vol. 26(5), pages 788-813, September.
  4. Augusto de la Torre & Juan Carlos Gozzi & Sergio L. Schmukler, 2008. "Capital Market Development: Whither Latin America?," NBER Chapters, in: Financial Markets Volatility and Performance in Emerging Markets, pages 121-154 National Bureau of Economic Research, Inc.
  5. Lúcio Vinhas de Souza, 2009. "Russia's Recent Economic and Reform Performance and Remaining Reform Challenges," Journal of the New Economic Association, New Economic Association, issue 1-2, pages 207-222.

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