Financial regulation, financial globalization, and the synchronization of economic activity

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

EconStor Open Access Articles and Book Chapters, 2013, vol. 68, issue 3, 1179-1228

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 EU markets.

Keywords: banking integration; Co-movement; contagion; fluctuations; finance (search for similar items in EconPapers)
JEL-codes: E32 F15 F36 G21 G28 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (197)

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Related works:
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)
Working Paper: Financial Regulation, Financial Globalization and the Synchronization of Economic Activity (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:216789

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