Financial integration and business cycle synchronization / Sebnem Kalemli-Ozcan, Elias Papaioannou, José Luis Peydró.
Material type: TextSeries: Working paper series (National Bureau of Economic Research) ; no. 14887.Publication details: Cambridge, Mass. : National Bureau of Economic Research, 2009Description: 27, [11], 12 p. : ill. ; 22 cmSubject(s): International finance | Business cyclesLOC classification: HB1 | .N38 no. 14887Online resources: Click here to access online Summary: Standard theory predicts that financial integration leads to a lower degree of business cycle synchronization. Surprisingly, cross-country studies find the opposite. Our contribution is to document the theoretically predicted negative effect of financial integration on business cycle synchronization as a robust regularity. We use a confidential dataset on banks' international bilateral exposure over the past three decades in a panel of twenty developed countries. The rich panel structure allows us to control for time-invariant country-pair factors and global trends that affect both financial integration and business cycle patterns. In contrast to previous empirical work we find that a higher degree of financial integration is associated with less synchronized output cycles. We also employ two distinct instrumental variable approaches to identify the one-way effect of integration on synchronization. These specifications reveal that the component of banking integration predicted by legislative-regulatory harmonization policies and the nature of the bilateral exchange rate regime has a negative effect on output synchronization.Item type | Current library | Collection | Call number | Copy number | Status | Date due | Barcode |
---|---|---|---|---|---|---|---|
Book | University of Macedonia Library Βιβλιοστάσιο Β (Stack Room B) | Research Papers | HB1.N38 no. 14887 (Browse shelf (Opens below)) | 1 | Available | 0013125474 |
Includes bibliographical references.
Standard theory predicts that financial integration leads to a lower degree of business cycle synchronization. Surprisingly, cross-country studies find the opposite. Our contribution is to document the theoretically predicted negative effect of financial integration on business cycle synchronization as a robust regularity. We use a confidential dataset on banks' international bilateral exposure over the past three decades in a panel of twenty developed countries. The rich panel structure allows us to control for time-invariant country-pair factors and global trends that affect both financial integration and business cycle patterns. In contrast to previous empirical work we find that a higher degree of financial integration is associated with less synchronized output cycles. We also employ two distinct instrumental variable approaches to identify the one-way effect of integration on synchronization. These specifications reveal that the component of banking integration predicted by legislative-regulatory harmonization policies and the nature of the bilateral exchange rate regime has a negative effect on output synchronization.
There are no comments on this title.