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Financial Integration and Growth - Is Emerging Europe Different?

  • Friedrich, Christian
  • Schnabel, Isabel
  • Zettelmeyer, Jeromin

Using industry-level data, this paper shows that the European transition region benefited much more strongly from financial integration in terms of economic growth than other developing countries in the years preceding the current crisis. We analyze several factors that may explain this finding: financial development, institutional quality, trade integration, political integration, and financial integration itself. The explanation that stands out is political integration. Within the group of transition countries, the effect of financial integration is strongest for countries that are politically closest to the EU. This suggests that political and financial integration are complementary and that political integration can considerably increase the benefits of financial integration.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8137.

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Date of creation: Dec 2010
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Handle: RePEc:cpr:ceprdp:8137
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  1. M. Ayhan Kose & Eswar S. Prasad & Ashley D. Taylor, 2009. "Thresholds in the Process of International Financial Integration," NBER Working Papers 14916, National Bureau of Economic Research, Inc.
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