Financial Integration within EU Countries: The Role of Institutions, Confidence and Trust

80 Pages Posted: 28 Sep 2007 Last revised: 23 Sep 2022

See all articles by Mehmet Fatih Ekinci

Mehmet Fatih Ekinci

Atilim University

Sebnem Kalemli-Ozcan

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Koc University, Graduate School of Business

Bent E. Sørensen

University of Houston - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: September 2007

Abstract

We investigate the degree of financial integration within and between European countries. We construct two measures of de-facto integration across European regions to capture "diversification" and "development" finance in the language of Obstfeld and Taylor (2004). We find evidence that capital market integration within the EU is less than what is implied by theoretical benchmarks and also less than what is found for U.S. states. We ask - why is this the case? Using country-level data for economic institutions, we find that these are not able to explain differences between countries. Using regional data from the World Values Surveys, we investigate the effect of "social capital" on financial integration among European regions. We find regions, where the level of confidence and trust is high, are more financially integrated with each other.

Suggested Citation

Ekinci, Mehmet Fatih and Kalemli-Ozcan, Sebnem and Sorensen, Bent E., Financial Integration within EU Countries: The Role of Institutions, Confidence and Trust (September 2007). NBER Working Paper No. w13440, Available at SSRN: https://ssrn.com/abstract=1017763

Mehmet Fatih Ekinci

Atilim University ( email )

Kýzýlcaþar Köyü - Ýncek - Gölbaþý
Ankara, 06836
Turkey

Sebnem Kalemli-Ozcan (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Koc University, Graduate School of Business ( email )

Rumelifeneri Yolu
34450 Sar?yer
Istanbul, 34450
Turkey

Bent E. Sorensen

University of Houston - Department of Economics ( email )

204 McElhinney Hall
Houston, TX 77204-5882
United States
713-743-3841 (Phone)
713-743-3798 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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