Financial Fragmentation and Economic Growth in Europe
49 Pages Posted: 8 Sep 2015
There are 2 versions of this paper
Financial Fragmentation and Economic Growth in Europe
Date Written: September 2015
Abstract
Using industry data from Eurostat and applying the Rajan-Zingales methodology, we investigate the real growth effects of banking sector integration in the European Union. Our sample stretches from 2000 until 2012 and includes the phase of rapid financial integration before the global financial crisis as well as the following phase of financial fragmentation and bank deleveraging. We find evidence that banking sector integration had a more than four times stronger growth effect during the crisis than in normal times. Growth effects are also stronger in times of domestic bank deleveraging. We conclude that concerns of European policy makers about fragmentation in the European banking sector are justified and that future reintegration is an important building block of future growth perspectives in the European Union.
Keywords: cross-border lending, economic growth, European Union, financial crisis, financial fragmentation, financial integration, foreign banks, Rajan-Zingales methodology
JEL Classification: F36, G01, G15
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Financial Fragmentation and Economic Growth in Europe
This is a CEPR Discussion Paper. CEPR charges a fee of $8.00 for this paper.
If you wish to purchase the right to make copies of this paper for distribution to others, please select the quantity.
