Financial Integration within E.U. Countries: The Role of Institutions, Confidence, and Trust

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 evide...

Full description

Saved in:
Bibliographic Details
Published in:NBER International seminar on macroeconomics 2007-01, Vol.2007 (1), p.325-400
Main Authors: Ekinci, Mehmet Fatih, Kalemli-Özcan, Şebnem, Sørensen, Bent E., Lane, Philip R., Mendoza, Enrique G.
Format: Article
Language:English
Subjects:
Capital income
Capital mobility
Countries
Gross domestic product
H I regions
Part IV: European Financial Integration
Population growth
Productivity
Region of integration
Social capital
Stock shares
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary: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 this is 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.
ISSN:1932-8796
2150-8372
DOI:10.1086/653996