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Deepening European Financial Integration: Theoretical Considerations and Empirical Evaluation of Growth and Employment Benefits

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  • Beckmann, Rainer
  • Eppendorfer, Carsten
  • Neimke, Markus

Abstract

This paper analyses some long-run macroeconomic effects of European financial integration. In particular we focus on the further reduction and abolition of cross-border barriers impeding the entry into the markets of banking and insurance products. We follow a theoretical as well as an empirical approach to make predictions about how deeper integration will affect growth and unemployment rates. In our growth model we show that enhanced foreign financial market penetration should increase the overall growth rate unambiguously. The empirical analysis includes a wide set of indicators, each of them capturing different aspects of financial development and financial market integration. On the basis of the estimations a weak growth impact of foreign market penetration can be identified. Hence, deeper financial integration generates a growth bonus. But the long-run growth effect is conditional on differences in institutional characteristics captured by country-specific effects. The analysis is supplemented by an analysis of the potential employment benefits of deeper financial integration. We show that the growth bonus can be transformed into an employment bonus, but also not without considering substantial country-specific differences.

Suggested Citation

  • 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.
  • Handle: RePEc:pra:mprapa:5272
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    References listed on IDEAS

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    Cited by:

    1. Ulrich Fritsche & Camille Logeay & Kirsten Lommatzsch & Katja Rietzler & Sabine Stephan & Rudolf Zwiener unter Mitarb. von Cansel Kiziltepe & Christian Proano-Acosta, 2005. "Auswirkungen von länderspezifischen Differenzen in der Lohn-, Preisniveau- und Produktivitätsentwicklung auf Wachstum und Beschäftigung in den Ländern des Euroraums: Endbericht ; Forschungsprojekt im ," DIW Berlin: Politikberatung kompakt, DIW Berlin, German Institute for Economic Research, volume 8, number pbk8, November.
    2. 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.
    3. Beckmann, Rainer & Eppendorfer, Carsten & Neimke, Markus, 2002. "Financial integration within the European Union: Towards a single market for insurance," MPRA Paper 5280, University Library of Munich, Germany.

    More about this item

    Keywords

    economic growth; unemployment; European integration;

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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