Financial regulation, financial globalization, and the synchronization of economic activity
Journal
Journal of Finance
Subject
Economics
Publishing details
Authors / Editors
Kalemli-Ozcan S;Papaioannou E;Peydro J L
Biographies
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
