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On Convergence across Transition Economies’ Financial Markets: the Role of Creditor Rights

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  • Simona Benedettini

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Abstract

Although twenty years have elapsed since the beginning of transition, Eastern European and Central Asian countries are still characterized by remarkably heterogeneous levels of economic development. In the light of the established causal relationship between finance and growth, we perform an absolute and conditional convergence analysis with reference to credit markets’ development to understand whether the lack of convergence in economic performances may also be a side - effect of persistently diversified financial architectures in these transition economies. Our investigation highlights: (i) the occurrence of absolute and conditional convergence; (ii) the existence of appreciable intra - distribution dynamics in the convergence process; and that, when conditioning for cross - country measures of the legal protection of creditors’ rights, (iii) the bankruptcy laws and their enforcement strongly boost credit markets’ average period growth rates.

Suggested Citation

  • Simona Benedettini, 2009. "On Convergence across Transition Economies’ Financial Markets: the Role of Creditor Rights," Department of Economics University of Siena 580, Department of Economics, University of Siena.
  • Handle: RePEc:usi:wpaper:580
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    References listed on IDEAS

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    More about this item

    Keywords

    convergence; financial market development; investor protection; rule of law.;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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