What Lies Beneath the Euro's Effect on Financial Integration: Currency Risk, Legal Harmonization, or Trade? / Sebnem Kalemli-Ozcan, Elias Papaioannou, José-Luis Peydró.

Format:

Book

Author/Creator:

Kalemli-Ozcan, Sebnem.

Contributor:

National Bureau of Economic Research.

Papaioannou, Elias.

Peydró, José-Luis.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15034.

NBER working paper series no. w15034

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

What Lies Beneath the Euro's Effect on Financial Integration

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2009.

Summary:

Although recent research shows that the euro has spurred cross-border financial integration, the exact mechanisms remain unknown. We investigate the underlying channels of the euro's effect on financial integration using data on bilateral banking linkages among twenty industrial countries in the past thirty years. We also construct a dataset that records the timing of legislative-regulatory harmonization policies in financial services across the European Union. We find that the euro's impact on financial integration is primarily driven by eliminating the currency risk. Legislative-regulatory convergence has also contributed to the spur of cross-border financial transactions. Trade in goods, while highly correlated with bilateral financial activities, does not play a key role in explaining the euro's positive effect on financial integration.

Notes:

Print version record

June 2009.