IDEAS home Printed from https://ideas.repec.org/p/zbw/ifwkwp/1004.html
   My bibliography  Save this paper

Financial Market Integration in the US: Lessons for Europe?

Author

Listed:
  • Buch, Claudia M.

Abstract

The introduction of the euro is expected to increase capital mobility in Euroland. While, as in the US, a common monetary policy is now performed, institutional structures are inherently more heterogenous. This paper argues that experience of the US with financial market integration can potentially serve as a benchmark for the integration effects. The paper finds that, despite the restrictions to the regional expansion of banks that have prevailed, the degree of financial integration within the US tends to exceed that within Europe. Implications of barriers to the free mobility of capital for monetary policy and banking supervision are discussed.

Suggested Citation

  • Buch, Claudia M., 2000. "Financial Market Integration in the US: Lessons for Europe?," Kiel Working Papers 1004, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:1004
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/17702/1/kap1004.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Razin, Assaf & Sadka, Efraim & Yuen, Chi-Wa, 1998. "A pecking order of capital inflows and international tax principles," Journal of International Economics, Elsevier, vol. 44(1), pages 45-68, February.
    2. Karen K. Lewis, 1999. "Trying to Explain Home Bias in Equities and Consumption," Journal of Economic Literature, American Economic Association, vol. 37(2), pages 571-608, June.
    3. Stigler, George J & Sherwin, Robert A, 1985. "The Extent of the Market," Journal of Law and Economics, University of Chicago Press, vol. 28(3), pages 555-585, October.
      • Stigler, George J. & Sherwin, Robert A., 1983. "The Extent of the Market," Working Papers 31, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    4. Shibata, Akihisa & Shintani, Mototsugu, 1998. "Capital mobility in the world economy: an alternative test," Journal of International Money and Finance, Elsevier, vol. 17(5), pages 741-756, October.
    5. Gordon, Roger H & Bovenberg, A Lans, 1996. "Why Is Capital So Immobile Internationally? Possible Explanations and Implications for Capital Income Taxation," American Economic Review, American Economic Association, vol. 86(5), pages 1057-1075, December.
    6. Clark, Todd E. & van Wincoop, Eric, 2001. "Borders and business cycles," Journal of International Economics, Elsevier, vol. 55(1), pages 59-85, October.
    7. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-329, June.
    8. Hess, Gregory D. & Shin, Kwanho, 2000. "Risk sharing by households within and across regions and industries," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 533-560, June.
    9. Joshua Aizenman, 2003. "Capital Mobility In A Second–Best World: Moral Hazard With Costly Financial Intermediation," Review of International Economics, Wiley Blackwell, vol. 11(1), pages 1-17, February.
    10. Allen N. Berger & Anil K. Kashyap & Joseph M. Scalise, 1995. "The Transformation of the U.S. Banking Industry: What a Long, Strange Trips It's Been," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 55-218.
    11. Mitchell A. Petersen & Raghuram G. Rajan, 2002. "Does Distance Still Matter? The Information Revolution in Small Business Lending," Journal of Finance, American Finance Association, vol. 57(6), pages 2533-2570, December.
    12. Berger, Allen N & Hannan, Timothy H, 1989. "The Price-Concentration Relationship in Banking," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 291-299, May.
    13. Boot, Arnoud W A & Thakor, Anjan V, 1997. "Banking Scope and Financial Innovation," The Review of Financial Studies, Society for Financial Studies, vol. 10(4), pages 1099-1131.
    14. Rudi Dornbusch & Carlo Favero & Francesco Giavazzi, 1998. "Immediate challenges for the European Central Bank," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 13(26), pages 16-64.
    15. Eichengreen, Barry, 1984. "Mortgage Interest Rates in the Populist Era," American Economic Review, American Economic Association, vol. 74(5), pages 995-1015, December.
    16. Paul S. Calem & Leonard I. Nakamura, 1998. "Branch Banking And The Geography Of Bank Pricing," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 600-610, November.
    17. Mitchell A. Petersen & Raghuram G. Rajan, 2000. "Does Distance Still Matter? The Information Revolution in Small Business Lending," NBER Working Papers 7685, National Bureau of Economic Research, Inc.
    18. Driscoll, John C., 2004. "Does bank lending affect output? Evidence from the U.S. states," Journal of Monetary Economics, Elsevier, vol. 51(3), pages 451-471, April.
    19. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer, 2002. "Government Ownership of Banks," Journal of Finance, American Finance Association, vol. 57(1), pages 265-301, February.
    20. Sinn, Stefan, 1992. "Saving-Investment Correlations and Capital Mobility: On the Evidence from Annual Data," Economic Journal, Royal Economic Society, vol. 102(414), pages 1162-1170, September.
    21. Centeno, Mario & Mello, Antonio S., 1999. "How integrated are the money market and the bank loans market within the European Union?," Journal of International Money and Finance, Elsevier, vol. 18(1), pages 75-106, January.
    22. John H. Boyd & Mark Gertler, 1994. "Are banks dead? Or are the reports greatly exaggerated?," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 18(Sum), pages 2-23.
    23. Berger, Allen N. & Bonime, Seth D. & Covitz, Daniel M. & Hancock, Diana, 2000. "Why are bank profits so persistent? The roles of product market competition, informational opacity, and regional/macroeconomic shocks," Journal of Banking & Finance, Elsevier, vol. 24(7), pages 1203-1235, July.
    24. Lawrence J. Radecki, 1998. "The expanding geographic reach of retail banking markets," Economic Policy Review, Federal Reserve Bank of New York, vol. 4(Jun), pages 15-34.
    25. Stephen G. Cecchetti, 2001. "Legal Structure, Financial Structure and the Monetary Policy Transmission Mechanism," Palgrave Macmillan Books, in: Deutsche Bundesbank (ed.), The Monetary Transmission Process, chapter 5, pages 170-207, Palgrave Macmillan.
    26. Giavazzi, Francesco & Danthine, Jean-Pierre & von Thadden, Ernst-Ludwig, 2000. "European Financial Markets After EMU: A First Assessment," CEPR Discussion Papers 2413, C.E.P.R. Discussion Papers.
    27. Gehrig, Thomas, 1993. " An Information Based Explanation of the Domestic Bias in International Equity Investment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(1), pages 97-109.
    28. Bayoumi, Tamim A. & Rose, Andrew K., 1993. "Domestic savings and intra-national capital flows," European Economic Review, Elsevier, vol. 37(6), pages 1197-1202, August.
    29. Kashyap, Anil K. & Stein, Jeremy C., 1995. "The impact of monetary policy on bank balance sheets," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 42(1), pages 151-195, June.
    30. Arnoud W. A. Boot & Anjan V. Thakor, 2000. "Can Relationship Banking Survive Competition?," Journal of Finance, American Finance Association, vol. 55(2), pages 679-713, April.
    31. Jackson, William E, III, 1992. "Is the Market Well Defined in Bank Merger and Acquisition Analysis?," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 655-661, November.
    32. Hugh Rockoff, 1999. "How Long Did It Take the United States to Become an Optimal Currency Area?," Departmental Working Papers 199910, Rutgers University, Department of Economics.
    33. Kleimeier, Stefanie & Sander, Harald, 2000. "Regionalisation versus globalisation in European financial market integration: Evidence from co-integration analyses," Journal of Banking & Finance, Elsevier, vol. 24(6), pages 1005-1043, June.
    34. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    35. Schmidt, Reinhard H. & Hackethal, Andreas & Tyrell, Marcel, 1999. "Disintermediation and the Role of Banks in Europe: An International Comparison," Journal of Financial Intermediation, Elsevier, vol. 8(1-2), pages 36-67, January.
    36. Andrew Atkeson & Tamim Bayoumi, 1993. "Do private capital markets insure regional risk? Evidence from the United States and Europe," Open Economies Review, Springer, vol. 4(3), pages 303-324, September.
    37. Armstrong, Harvey W. & Balasubramanyam, V. N. & Salisu, Mohammed A., 1996. "Domestic savings, intra-national and intra-European Union capital flows, 1971-1991," European Economic Review, Elsevier, vol. 40(6), pages 1229-1235, June.
    38. Gehrig, Thomas, 1998. "Screening, cross-border banking, and the allocation of credit," Research in Economics, Elsevier, vol. 52(4), pages 387-407, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sebastian Weber, 2009. "European Financial Market Integration: A Closer Look at Government Bonds in Eurozone Countries," Working Paper / FINESS 1.1b, DIW Berlin, German Institute for Economic Research.
    2. Driscoll, John C., 2004. "Does bank lending affect output? Evidence from the U.S. states," Journal of Monetary Economics, Elsevier, vol. 51(3), pages 451-471, April.
    3. Liliana DONATH, 2008. "Theoretical Considerations Concerning Foreign Banks Entry on The Domestic Banking Market," Timisoara Journal of Economics, West University of Timisoara, Romania, Faculty of Economics and Business Administration, vol. 1(1), pages 109-119.
    4. P. Butzen & S. Cheliout & H. Geeroms, 2014. "Lessons from the US for the institutional design of EMU," Economic Review, National Bank of Belgium, issue ii, pages 82-101, September.
    5. Beckmann, Rainer & Eppendorfer, Carsten & Neimke, Markus, 2002. "Deepening European Financial Integration: Theoretical Considerations and Empirical Evaluation of Growth and Employment Benefits," MPRA Paper 5272, University Library of Munich, Germany.
    6. Beckmann, Rainer & Eppendorfer, Carsten & Neimke, Markus, 2002. "Market Access Strategies in the EU Banking Sector - Obstacles and Benefits towards an integrated European Retail Market," MPRA Paper 5273, University Library of Munich, Germany.
    7. Schüler, Martin, 2002. "Integration of the European market for e-finance: evidence from online brokerage," ZEW Discussion Papers 02-24, ZEW - Leibniz Centre for European Economic Research.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Heinemann, Friedrich & Schüler, Martin, 2002. "How integrated are the European retail financial markets? A cointegration analysis," ZEW Discussion Papers 02-22, ZEW - Leibniz Centre for European Economic Research.
    2. Buch, Claudia M., 2001. "Cross-Border Banking and Transmission Mechanisms: The Case of Europe," Kiel Working Papers 1063, Kiel Institute for the World Economy (IfW Kiel).
    3. Massimiliano Affinito & Fabio Farabullini, 2006. "An empirical analysis of national differences in the retail bank interest rates of the euro area," Temi di discussione (Economic working papers) 589, Bank of Italy, Economic Research and International Relations Area.
    4. Claudia M. Buch, 2000. "Capital Market Integration in Euroland: The Role of Banks," German Economic Review, Verein für Socialpolitik, vol. 1(4), pages 443-464, November.
    5. Apergis, Nicholas & Tsoumas, Chris, 2009. "A survey of the Feldstein-Horioka puzzle: What has been done and where we stand," Research in Economics, Elsevier, vol. 63(2), pages 64-76, June.
    6. Massimiliano Affinito & Fabio Farabullini, 2009. "Does the Law of One Price Hold in Euro-Area Retail Banking? An Empirical Analysis of Interest Rate Differentials across the Monetary Union," International Journal of Central Banking, International Journal of Central Banking, vol. 5(1), pages 5-37, March.
    7. Claudia Buch, 1999. "Capital mobility and EU enlargement," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 135(4), pages 629-656, December.
    8. Pietro Alessandrini & Luca Papi & Alberto Zazzaro, 2003. "Banks, regions and development," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 56(224), pages 23-55.
    9. Buch, Claudia M., 2000. "Information or Regulation: What Is Driving the International Activities of Commercial Banks?," Kiel Working Papers 1011, Kiel Institute for the World Economy (IfW Kiel).
    10. Pietro Alessandrini & Luca Papi & Alberto Zazzaro, 2003. "Banche, territorio e sviluppo," Moneta e Credito, Economia civile, vol. 56(221), pages 3-43.
    11. Hans Degryse & Steven Ongena, 2005. "Distance, Lending Relationships, and Competition," Journal of Finance, American Finance Association, vol. 60(1), pages 231-266, February.
    12. Ben R. Craig & William E. Jackson & James B. Thomson, 2006. "Small-firm credit markets, SBA-guaranteed lending, and economic performance in low-income areas," Working Papers (Old Series) 0601, Federal Reserve Bank of Cleveland.
    13. Phiri, Andrew, 2019. "The Feldstein-Horioka Puzzle and the Global Financial Crisis: Evidence from South Africa using Asymmetric Cointegration Analysis," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 72(2), pages 139-170.
    14. Claudia M. Buch, 2005. "Distance and International Banking," Review of International Economics, Wiley Blackwell, vol. 13(4), pages 787-804, September.
    15. Ridhwan, M.M. & Nijkamp, P. & Rietveld, P., 2008. "Regional development and monetary policy : a review of the role of monetary unions, capital mobility and locational effects," Serie Research Memoranda 0007, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    16. Ben R. Craig & William E. Jackson & James B. Thomson, 2006. "Small firm credit market discrimination, SBA-guaranteed lending, and local market economic performance," Working Papers (Old Series) 0613, Federal Reserve Bank of Cleveland.
    17. Bhattacharya, Utpal & Groznik, Peter, 2008. "Melting pot or salad bowl: Some evidence from U.S. investments abroad," Journal of Financial Markets, Elsevier, vol. 11(3), pages 228-258, August.
    18. Phiri, Andrew, 2017. "The Feldstein-Horioka puzzle and the global recession period: Evidence from South Africa using asymmetric cointegration analysis," MPRA Paper 79096, University Library of Munich, Germany.
    19. Haukioja, Teemu & Hahl, Jarmo, 2001. "The Emergence of the New Economy, and its Challenge to Financial Intermediation and Banking," Discussion Papers 772, The Research Institute of the Finnish Economy.
    20. Buch, Claudia M., 2001. "Financial Market Integration in a Monetary Union," Kiel Working Papers 1062, Kiel Institute for the World Economy (IfW Kiel).

    More about this item

    Keywords

    financial market integration; deregulation; Europe; US;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:ifwkwp:1004. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/iwkiede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.