Financial Regulation, Financial Globalization and the Synchronization of Economic Activity

Sebnem Kalemli-Ozcan, Elias Papaioannou and Jose-Luis Peydro

No 14887, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We analyze the impact of financial globalization on business cycle synchronization utilizing a proprietary database on banks' international exposure for industrialized countries during 1978- 2006. Theory makes ambiguous predictions and identification has been elusive due to lack of bilateral time-varying financial linkages data. In contrast to conventional wisdom and previous empirical studies, we identify a strong negative effect of banking integration on output synchronization, conditional on global shocks and country-pair heterogeneity. Similarly, we show divergent economic activity as a result of higher integration using an exogenous de-jure measure of integration based on financial regulations that harmonized segmented EU markets.

JEL-codes: E32 F15 F36 G21 O16 (search for similar items in EconPapers)
Date: 2009-04
New Economics Papers: this item is included in nep-bec, nep-cba, nep-mac and nep-opm
Note: EFG IFM
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Citations: View citations in EconPapers (14)

Published as Sebnem Kalemli-Ozcan & Elias Papaioannou & José-Luis Peydró, 2013. "Financial Regulation, Financial Globalization, and the Synchronization of Economic Activity," Journal of Finance, American Finance Association, vol. 68(3), pages 1179-1228, 06.

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Journal Article: Financial Regulation, Financial Globalization, and the Synchronization of Economic Activity (2013)
Working Paper: Financial regulation, financial globalization and the synchronization of economic activity (2010)
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