Financial regulation, financial globalization and the synchronization of economic activity

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

No 1221, Working Paper Series from European Central Bank

Abstract: We identify the effect of financial integration on international business cycle synchronization, by utilizing a confidential database on banks’ bilateral exposure and employing a country-pair panel instrumental variables approach. Countries that become more integrated over time have less synchronized growth patterns, conditional on global shocks and country-pair factors. To account for reverse causality and measurement error, we exploit variation in the transposition dates of financial legislation. We find that increases in financial integration stemming from regulatory harmonization policies are followed by more divergent cycles. Our results contrast with those of the previous studies which suffer from the standard identification problems. JEL Classification: E32, F15, F36, G21, G28, O16

Keywords: banking integration; co-movement; Financial Legislation; fluctuations (search for similar items in EconPapers)
Date: 2010-07
New Economics Papers: this item is included in nep-ban, nep-bec, nep-cba, nep-ifn and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1221.pdf (application/pdf)

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 (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20101221

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().