6533b873fe1ef96bd12d595b
RESEARCH PRODUCT
Financial Fragmentation and Economic Growth in Europe
Isabel SchnabelChristian Seckingersubject
cross-border lending; economic growth; European Union; financial crisis; financial fragmentation; financial integration; foreign banks; Rajan-Zingales methodologyjel:G15F36Financial fragmentation; financial integration; foreign banks; crossborder lending; economic growth; financial crisis; Rajan-Zingales methodologyG15ddc:330G01jel:G01jel:F36description
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.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2015-01-01 | SSRN Electronic Journal |