EconPapers    
Economics at your fingertips  
 

Deep Financial Integration and Volatility

Vadym Volosovych (), Bent Sorensen and Sebnem Kalemli-Ozcan ()

No 232, 2010 Meeting Papers from Society for Economic Dynamics

Abstract: output volatility at micro and macro levels. Using a very large firm-level dataset (AMADEUS) from 16 European countries, we construct a measure of "deep" financial integration at the regional-level based on observations of foreign ownership at the firm-level. We find a significant positive effect of foreign ownership on the volatility of firms' outcomes, both in static and dynamic empirical frameworks. This effect survives aggregation and carries over to regional output, leading to a positive association between deep financial integration and aggregate fluctuations. We exploit a quasi-natural experiment, Financial Services Action Plan of the European Union (EU), to identify the causal effect of financial integration on volatility. We argue that the regions with higher levels of trust that are located in countries who harmonize their financial policies sooner, will have higher levels of financial integration. We construct a measure of "predicted integration" based on the interaction between the transposition dates of the EU-wide financial policy directives and the regional trust. Using predicted integration as an instrument, we find that financial integration leads to more aggregate volatility.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (18) Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: DEEP FINANCIAL INTEGRATION AND VOLATILITY (2014) Downloads
Working Paper: Deep Financial Integration and Volatility (2010) Downloads
Working Paper: Deep Financial Integration and Volatility (2010) Downloads
Working Paper: Deep Financial Integration and Volatility (2010) Downloads
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:red:sed010:232

Access Statistics for this paper

More papers in 2010 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().

 
Page updated 2022-09-22
Handle: RePEc:red:sed010:232