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The impact of regulatory quality on deepens level of financial integration: Evidence from the European Union countries (NMS-10)

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  • Ahmić Azra

    (1 International University Sarajevo, Faculty of Business and Administration, Sarajevo, Bosnia and Herzegovina)

  • Isović Ilma

    (2 International University Sarajevo, Faculty of Business and Administration, Sarajevo, Bosnia and Herzegovina)

Abstract

This study seeks to empirically explore whether the regulatory quality in the NMS-10 impacts deepening international financial integration and whether the strengthening of regulatory quality for NMS-10 has a causal effect on the level of international financial integration (IFI) in NMS-10. The study covers NMS-10 between 1995 and 2020. The estimation of parameters was made with descriptive statistics, the Breusch-Pagan test, the Pesaran test, the Granger causality test, and OLS regression to analyze the impact of REQ on IFI. The findings of the study reveal that regulatory quality has a statistically significant effect in deepening the process of financial integration for both periods, in the pre-accession and post-accession EU process. In addition, the results demonstrate that the regulatory quality of NMS-10 provides sound laws and policies that support the business environment, encourage cross-bordering financial transactions. Moreover, the results of the Granger causality test show that the level of global financial integration is causally impacted by the improvement in NMS-10 regulatory quality. This indicates that regulatory effectiveness might predicts international financial integration.

Suggested Citation

  • Ahmić Azra & Isović Ilma, 2023. "The impact of regulatory quality on deepens level of financial integration: Evidence from the European Union countries (NMS-10)," Economics, Sciendo, vol. 11(1), pages 127-142, June.
    • Handle: RePEc:vrs:econom:v:11:y:2023:i:1:p:127-142:n:14
    DOI: 10.2478/eoik-2023-0004
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    References listed on IDEAS

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    More about this item

    Keywords

    regulatory quality; financial integration; international financial integration; Granger causality; New member states (NMS-10);
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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