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

Journal

Journal of Finance

Subject

Economics

Publishing details

Journal of Finance 2013 Vol 68:3 p 1179-1228

Authors / Editors

Kalemli-Ozcan S;Papaioannou E;Peydro J L

Biographies

Elias Papaioannou

Publication Year

2013

Abstract

We analyze the impact of financial globalization on business cycle synchronization using a proprietary database on banks’ international exposure for industrialized countries during 1978 to 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 due to higher integration using an exogenous de-jure measure of integration based on financial regulations that harmonized EU markets.

Available on ECCH

No


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