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Is full banking integration desirable?

Listed author(s):
  • Iván Arribas

    ()

    (ERI-CES and Ivie, Universitat de València, Spain)

  • Jesús Peiró-Palomino

    ()

    (Department of Applied Economics II, Universitat de València, Spain)

  • Emili Tortosa-Ausina

    ()

    (IVIE, Valencia and Department of Economics, Universitat Jaume I, Castellón, Spain)

The aim of this paper is to analyze the links between banking integration and economic development for a sample of OECD countries. We measure banking integration considering state-of-the-art indicators that measure not only how open a banking system is but also its degree of connectedness with other banking systems. In a second stage, we plug these indicators in a model of economic growth, also controlling for other relevant variables considered by the economic growth literature. In contrast to previous initiatives, this second stage explicitly takes into account the differing levels of economic development of the countries in our sample, since the benefits of enhanced banking inte- gration might not be generalizable. To this end, we implement quantile regression, also considering the presence of endogenous regressors. Results show that bank connectedness is more important for economic development than bank openness, but the combined effect (i.e., banking integration) overall is positive and significant. Quantile regression models in the second stage of the analysis show that the effects are stronger for the poorest economies.

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Paper provided by Economics Department, Universitat Jaume I, Castellón (Spain) in its series Working Papers with number 2015/05.

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Length: 46 pages
Date of creation: 2015
Handle: RePEc:jau:wpaper:2015/05
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