The paper seeks to empirically explore the variations and changes in the degree of International Financial Integration (IFI) between the European Transition countries and Post-Transition countries between 2000 and 2016. The estimation of parameters was made using the Generalized Method of Moment (GMM) approach. The findings of the study reveal that European Post-Transition countries have relatively more developed financial systems compared to European Transition countries, where private credit market is still playing an overwhelmingly important role in a financial system while stock markets are in an early stage of development constituting a relatively small share of the financial system. Even though in Panel 3 there are significant control variables, our findings reveal that IFI in European transition countries are affected neither by stock market capitalization and private credit markets. Consequently, they can’t be used in this stage of financial development for explanation of variations and changes in the degree of IFI.
If the inline PDF is not rendering correctly, you can download the PDF file here.
Adam, K., Jappelli T., Menichini A. M., Padula M., and M. Pagano (2002), Analyse, Compare, and Apply Alternative Indicators and Monitoring Methodologies to Measure the Evolution of Capital Market Integration in the European Union, Report to the European Commission.
Alotaibi, R. and Mishra, A. (2014). Determinants of International Financial Integration of GCC Markets, in Mohamed E. H. A., Sabri B., Duc K. N., Emerging Markets and the Global Economy: A handbook, : Elsevier, pp.749-771.
Arellano, M., and Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations Review of Economic Studies, 58(194), 277–297
Baltagi, B. H. (2008). Econometric Analysis of Panel data, 4th ed., Hoboken, N.J.: John Wiley and Sons,
Bond, S. R., (2002). Dynamic panel data models: a guide to micro data methods and practice. Portuguese Economic Journal, 1(2), pp. 141-162. doi: 10.1007/s10258-002-0009-9
Daly, K. J. and Vo, V.X, (2007). Quantifying the drivers of international financial integration, Journal of Investment Strategy, Volume 2, Number 1, 2007.
Derado, D. (2009). Financijska integracija i financijska kriza: Hrvatska na putu prema ekonomskoj i monetarnoj uniji, Financijska teorija i praksa, 33 (3), 303-333. Retrieved from: http://www.ijf.hr/FTP/2009/3/derado.pdf.
Eichengreen, B. (2001). Capital Account Liberalization: What Do the Cross-Studies Tell Us?, World Bank Economic Review, October 2001; 15: 341-65.
Furceri, D., Guichard, S. and Rusticelli, E. (2012). Medium-Term Determinants Of International Investment Positions: The Role Of Structural Policies, Journal of International Commerce, Economics and Policy (JICEP), 3 (2), 1-32.
Herring, R. J. (1994). International Financial Integration: The Continuing Process, Wharton School Financial Institutions Center Paper 94–23, Philadelphia: University of Pennsylvania.
Karwowski, E and Stockhammer, E. (2016). Financialisation in Emerging Economies: A Systematic Overview and Comparison with Anglo-Saxon Economies, Post Keynesian Economics Study Group, Working Paper 1616.
Lane, P. R. and Milesi-Ferretti, G. M. (2003). International financial Integration, Discussion Paper N 3, Institute for International Integration Studies and Economics Department, TCD and CEPR,
Lane, P. R. and Milesi-Ferretti, G. M. (2006). The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970 2004, IMF Working Paper 06/69, Washington: International Monetary Fund.
La Porta, R., Lopez De Silanes, F., Shleifer, A., and Vishny, R. (1997). The Legal Determinant of External Finance. Journal of Finance, Vol. 52, No. 3: 1131–1150.
Portes, R. and Rey, H. (1999). The Determinants of Cross-Border Equity Flows, National Bureau of Economic Research Working Paper, no. 7336. Retrieved from: http://www.nber.org/papers/w7336
Roodman, D. (2006). How to Do xtabond2: An Introduction to “Difference” and “system” GMM in Stata” Working Paper Number 103, Center for Global Development.
Rusek, A. (2005). Financial Integration and the New EU Member Countries: Challenges and Dilemmas. PRAGUE ECONOMIC PAPERS, 1, 2005. DOI: 10.18267/j.pep.250.
Vo, X. V. and Daly, K. J. (2004). The relationship between net private capital flows and economic growth in emerging Asian economies. International Business Research Conference: Melbourne, Vic.,
Vo, X. V. and Daly, K. J. (2007). Determinants of international financial integration. (R. P. C. Leal, Ed.), Rio de Janerio, Coppead Graduate School of Business: Federal University of Rio de Janerio-Global Finance Conference
Volz, U. (2004). European financial integration and the financing of local businesses in the new EU member states, Working Paper No. 89., London, UK: European Bank for Reconstruction and Development.
Von Furstenberg, G. M. (1998). From Worldwide Capital Mobility to International Financial Integration: A Review Essay, Open Economies Review, 9 (1), 53-89.
Voronkova, S. (2004). Equity Market Integration in Central European Emerging Markets: A Co integration Analysis with Shifting Regimes, International Review of Financial Analysis, 13 (5), pp. 633-647.