Financial Liberalization and Business Cycles: The Experience of New EU Member States in the Baltics and Central Eastern Europe

Deutsche Bundesbank Discussion Paper

64 Pages Posted: 16 Sep 2004

Date Written: September 2004

Abstract

This paper extends the work of Kaminsky and Schmukler (2003) to the Baltic and Central Eastern European new Member States of the European Union, to test if the same short-run increase in cyclical volatility arising from financial integration is observed in this specific sample of "emerging markets". This work finds signs that, contrary to other emerging markets, this does not happen: for the new Member States, financial integration, similarly to the outcome observed in mature market economies, reduces cyclical volatility both in the short and in the long run. Weak indications are found that this may happen partially due to the anchoring of expectations provided by the EU Accession, and to the more robust institutional framework imposed by this process onto the countries in question.

Keywords: Enlargement, European Union, financial liberalization, booms, busts, cycles

JEL Classification: F02, F30, F32, F33, F34, F36, G15, P20

Suggested Citation

Vinhas de Souza, Lucio Vinhas, Financial Liberalization and Business Cycles: The Experience of New EU Member States in the Baltics and Central Eastern Europe (September 2004). Deutsche Bundesbank Discussion Paper. Available at SSRN: https://ssrn.com/abstract=522802 or http://dx.doi.org/10.2139/ssrn.522802

Lucio Vinhas Vinhas de Souza (Contact Author)

DG-ECFIN, European Commission ( email )

BU-1 05/190
Brussels, Bruxelles B-1049
Belgium

HOME PAGE: http://www.vinhasdesouza.eu

UNU-CRIS ( email )

Potterierei 72
Brugge, 8000
Belgium

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