The impact of regulatory quality on deepens level of financial integration: Evidence from the European Union countries (NMS-10)

Ahmić Azra () and Isović Ilma
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Ahmić Azra: International University Sarajevo, Faculty of Business and Administration, Sarajevo, Bosnia and Herzegovina
Isović Ilma: International University Sarajevo, Faculty of Business and Administration, Sarajevo, Bosnia and Herzegovina

Economics, 2023, vol. 11, issue 1, 127-142

Abstract: This study seeks to empirically explore whether the regulatory quality in the NMS-10 impacts deepening international financial integration and whether the strengthening of regulatory quality for NMS-10 has a causal effect on the level of international financial integration (IFI) in NMS-10. The study covers NMS-10 between 1995 and 2020. The estimation of parameters was made with descriptive statistics, the Breusch-Pagan test, the Pesaran test, the Granger causality test, and OLS regression to analyze the impact of REQ on IFI. The findings of the study reveal that regulatory quality has a statistically significant effect in deepening the process of financial integration for both periods, in the pre-accession and post-accession EU process. In addition, the results demonstrate that the regulatory quality of NMS-10 provides sound laws and policies that support the business environment, encourage cross-bordering financial transactions. Moreover, the results of the Granger causality test show that the level of global financial integration is causally impacted by the improvement in NMS-10 regulatory quality. This indicates that regulatory effectiveness might predicts international financial integration.

Keywords: regulatory quality; financial integration; international financial integration; Granger causality; New member states (NMS-10) (search for similar items in EconPapers)
JEL-codes: F30 F36 G18 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:econom:v:11:y:2023:i:1:p:127-142:n:14

DOI: 10.2478/eoik-2023-0004

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