Level Of Financial Integration Research Articles

Financial Integration and Structure in Europe: A Comparative Case Study of Bosnia and Herzegovina and Slovenia

The study measures and compares the levels of financial integration in Bosnia and Herzegovina and Slovenia between 2000 and 2020. This study aims to determine the impact of industrial index, gross domestic product per capita, trade openness, and corporate tax rate on the level of international financial integration. The statistical methods employed are unit root tests, OLS regression, the Breusch-Pagan test, and the heteroskedasticity test. For the 20-year time span and annual data for each parameter, the results have shown a significant positive correlation between gross domestic product per capita and financial integration for both countries. The results for Slovenia indicate that financial integration is negatively affected by trade openness and corporate tax rates, whereas gross domestic product per capita and industrial production index affect positively. In the case of Bosnia and Herzegovina, corporate tax rate and industrial production index affect financial integration negatively, while trade openness affect positively but insignificant with financial integration.

Socio-economic determinants of financial inclusion in Central and Eastern Europe during the COVID-19 pandemic

A society’s financial inclusion – understood as possessing and actively using a bank or non-bank account – is one of many indicators of sustainable growth and economic development. The COVID-19 pandemic has accelerated the process of financial integration through the use of modern technologies in finance, financial innovation and the need to have an account to receive aid from government crisis shields or to confirm official activities through a trusted profile in a bank. Furthermore, EU regulations have accelerated the process of financial integration through the institution of a basic bank account and open banking solutions. Financial education programs and activities of financial institutions under the Corporate Social Responsibility (CSR)/Environment Social Governance (ESG) strategy have also contributed to improving financial literacy, which directly reduces financial self-exclusion. The aim of the article is to check whether financial inclusion has increased during the pandemic and to identify socio-demographic determinants of this inclusion such as sex, age, in or out labor force, education, and wealth level in selected CEE countries. The article uses statistical data from The Global Findex research conducted since 2011 and by the World Bank, covering the period 2011-2021. The empirical study confirmed that during the COVID-19 pandemic, the largest increases in the percentage of people aged 15+ with a bank account were recorded, and the studied Central and Eastern European countries differed in this respect. Selectedsocio-demographic variables differentiated the level of financial integration in the analysed countries. The level of financial inclusion in selected European countries increased in the considered period, especially in countries with the initially lowest level of financial inclusion (Ukraine, Bulgaria). Financial inclusion was positively influenced by professional activity, at least secondary education, age of 25 and above, and high income. The greatest degree of financial inclusion was differentiated by education, and then by professional activity. However, sex was not shown to differentiate the level of financial inclusion.

Financial integration and earnings management: evidence from emerging markets

PurposeThis study examines whether country-level financial integration affects firms' accounting choices and the quality of financial information.Design/methodology/approachThis study employs Propensity Score Matching (PSM), and panel regressions of a large sample of data from 20 emerging markets over the period 1987–2018.FindingsThis study finds evidence that increased level of financial integration is significantly positively associated with firms' accruals earnings management (AEM) and real earnings management (REM).Research limitations/implicationsFindings in the study have implications for standard-setting bodies that aim to enhance the usefulness of financial reporting quality. The study also has implications for various initiatives by governments in emerging markets aimed at raising investor confidence and fostering stock market development through greater financial integration.Practical implicationsFindings in the study have implications for standard-setting bodies that aim to enhance the usefulness and quality of financial reporting. The findings can be of interest to analysts, auditors and other monitoring institutions who play a crucial role in detecting earnings management and reducing information asymmetry. Finally, the study has implications for various initiatives by governments in emerging markets aimed at raising investor confidence and fostering stock market development through greater financial integration.Originality/valueFindings in the study reveal how country-level financial integration affects accruals and real earnings management in a sample of firms from 20 emerging markets. Further, the study adds to the growing body of literature on emerging markets where capital markets mechanisms, regulatory environment and firm's corporate governance are distinct to developed markets.

The impact of regulatory quality on deepens level of financial integration: Evidence from the European Union countries (NMS-10)

Abstract This study seeks to empirically explore whether the regulatory quality in the NMS-10 impacts deepening international financial integration and whether the strengthening of regulatory quality for NMS-10 has a causal effect on the level of international financial integration (IFI) in NMS-10. The study covers NMS-10 between 1995 and 2020. The estimation of parameters was made with descriptive statistics, the Breusch-Pagan test, the Pesaran test, the Granger causality test, and OLS regression to analyze the impact of REQ on IFI. The findings of the study reveal that regulatory quality has a statistically significant effect in deepening the process of financial integration for both periods, in the pre-accession and post-accession EU process. In addition, the results demonstrate that the regulatory quality of NMS-10 provides sound laws and policies that support the business environment, encourage cross-bordering financial transactions. Moreover, the results of the Granger causality test show that the level of global financial integration is causally impacted by the improvement in NMS-10 regulatory quality. This indicates that regulatory effectiveness might predicts international financial integration.

Konvergentnost bankarskog sektora Republike Srbije u uslovima finansijske integracije

The process of financial integration is at the center of interest for all economic entities. A higher level of financial integration contributes to the improvement of the performance of national economies by reducing capital costs and improving the allocation of financial resources. With the trend of globalization since the late 1980s, the process of financial integration has been taking place as a result of the removal of barriers to the movement of capital between countries. This paper qualitatively analyzes financial integration and financial integration indicators. In this context, special attention in the paper is devoted to the integration of the banking sector of the Republic of Serbia. The structure of the banking sector of the Republic of Serbia is examined, as well as the values of concentration and competition indicators - the Herfindahl-Hirschman Index and CR5. The data was collected during a ten-year period that spans from the aftermath of the global economic crisis and continues until the onset of the COVID-19 pandemic. Additionally, profitability indicators (ROA and ROE) in Western Balkan countries were observed from 2013 to 2020.

Gradual financial integration and macroeconomic fluctuations in emerging market economies: evidence from China.

This paper extends the conventional DSGE literature by developing a New Keynesian DSGE model featuring imperfect financial markets with various friction costs, which allows for the study of macroeconomic dynamics under different levels of financial integration. We conduct Bayesian estimation and draw implications on the macroeconomic effects of gradual financial integration using the Chinese economy as an example. We find that macroeconomic fluctuations vary with different levels of financial integration and the specific relationship depends on the nature of exogenous shocks. Variance decomposition analysis shows that as financial integration increases, the contribution of foreign exchange shocks declines while that of domestic shocks increases. We also find that there is a notable enhancement of welfare associated with improvement in financial integration, and the effectiveness of monetary policy in emerging market economies would be weakened as financial integration increases.

Developing Financial Integration with the Introduction of Financial Technologies in the Eurasian Economic Union Countries

The global economic crisis of 2008-2009 and all subsequent crisis waves revealed the need to deepen regional integration processes in order to mitigate the consequences of crises and prevent future financial shocks. This aspect seems significant even for the European Union, which has already achieved a high level of financial integration due to the introduction of a single currency and the establishment of the European Central Bank. However, this problem is even more topical for countries with a significantly less developed level of integration, including the countries of the Eurasian Economic Union (EAEU). The positive effect of financial integration is largely due to financial globalization and digitization of the economy, fintech development, which is a transformative mechanism for coordinating fiscal and monetary policy instruments in financial services, as well as removing barriers to cross-border financial transactions. The purpose of the study is to uncover the prerequisites and trends of financial integration of the EAEU countries amid rapid fintech development and application. The possibilities of its use are revealed by blockchain, Big Data, artificial intelligence, crowdfunding, which can contribute to optimizing customer service, asset management of financial institutions in the domestic market, simplify and increase the speed of information exchange between financial institutions of different countries and the VAT refund process, increase investment flows, develop previously unused business lines, create collective projects and, as a result, contribute to further financial integration and mutually beneficial cooperation. The methodology of the study is based on the synthesis of comparative, structural, expert opinions and statistical analysis methods. Regulatory legal acts of the EAEU and individual countries of the alliance, reports and analytical materials of the Eurasian Economic Commission (EEC) and central banks of the EAEU countries served as the primary sources of the research. It has been revealed that the introduction of fintech in most of the analyzed countries outpaces the formation of the legal basis. At the same time, it was found that the spread of fintech can assist the implementation of all measures outlined by the Concept of Forming a Common Financial Market of the EAEU countries. Owing to Belarus, Kazakhstan and Russia, which are more advanced in fintech, Armenia and Kyrgyz Republic have the opportunity to achieve a competitive level in this area in a shorter time.

On the Issue of Free Movement of Financial Services and Capital in the Eurasian Economic Union

The article examines the macroeconomic indicators of the EAEU countries, used in quantitative methods for assessing financial integration, as well as a number of documents that form the common financial market (CFM) of the EAEU.Aim. To identify the content of the concept of the EAEU CFM, having determined the elements of control of the movement of financial services and capital, to assess the possibilities of its formation, taking into account the achieved integration.Task. To confirm the hypothesis that the insufficiently high existing level of financial integration in the EAEU is the reason why the mechanisms of the EAEU CFM cannot be sufficiently developed.Methods. Correlation analysis, analysis and comparison of texts.Results. Capital mobility is high in Russia and Kyrgyzstan. Converging consumption growth rates is a sign of equalizing financial risks. The countries differ in their exchange rate regimes, two of them maintain a double exchange rate, three have requirements for the repatriation of foreign exchange earnings. Capital flow measures are multidirectional. The CFM assumes the approximation of legislation in the field of financial services. Countries only commit to cross-border supply and consumption abroad for four subsectors, commercial presence is governed by national legislation, and the presence of natural persons is subject to migration regulations. The obligations to liberalize the services market taken to the WTO are not uniform, and the list of exemptions from obligations under the EAEU Treaty is more restrictive than obligations to the WTO. Most of the foreign exchange regulation measures are implemented in accordance with national laws. Investors from member states do not receive national treatment upon establishment.Conclusion. The hypothesis is confirmed. The significance of the work for the theories of financial integration lies in the identification of the forms in which the CFM EAEU exists. The recommendations are intended for use in the work of the Eurasian Economic Commission.

Change is Inevitable, Progress is Optional: Impact of FED Tapering Announcements on North African Equity Markets

We propose one of the first empirical evaluations of the transmission of the 2013–2015 Federal reserve Tapering announcements of assets purchases, to the stock markets of the three north African countries with the most advanced financial development: Egypt, Morocco, and Tunisia. We use two alternative announcement effects dummy variables: one constructed from econometric tests of individual announcements, the other constructed from the media coverage. In spite of a relatively low level of financial integration, the results of panel data tests show a significant negative impact of announcements, generally associated with the Federal Open Market Committee (FOMC) meetings rather than minutes. This result is in line with the literature on the domestic and international announcement effects of the information released by the FOMC, in the absence of discordance of tone between the meeting statement and the minutes. From the perspective of policy recommendations, the study of the interaction of Tapering announcements with domestic fundamentals shows interesting results. Fundamentals with favorable direct effects on equity markets dynamics could indirectly increase their vulnerability to announcement effects. Inflation, domestic investment and commercial openness show significant interaction effects in the opposite sense of their direct effects, some of which are superior to the direct effects.

The effects of financial integration during crises

We investigate the role of financial integration in the spread of the 2008 global financial crisis. Using a rich dataset covering 31 countries between 1978 and 2018, we find that during the 2008 financial crisis, when two countries have a higher level of financial integration, their consumption cycles are more synchronized. Similar patterns are found for investment and output. However, we also find that during times outside of the 2008 financial crisis, higher financial integration leads to more divergent consumption and output cycles. We build a two-country model with global banks and variable capital utilization to illustrate that the impact of financial integration on business cycle synchronization depends on the type of shock and that variable capital utilization is the key to accounting for the relationship between financial integration and investment synchronization. The calibrated model replicates our empirical findings reasonably well. Finally, our welfare analysis indicates that financial integration leads to welfare losses during financial crises but to welfare gains outside of financial crises.

The non-monotonic relationship between financial integration and cost efficiency: Evidence from East Asian commercial banks

This is the first study to investigate how financial integration affects bank cost efficiency by applying the non-monotonic stochastic frontier model developed by Wang (2002) to a sample of East Asian commercial banks over the period 1997–2014. We consistently report a non-monotonic association between financial integration and bank cost efficiency. Financial integration improves bank cost efficiency but then becomes efficiency-impeding. Our empirical results support the existence of an optimal level of financial integration and validate the IMF’s nuanced ‘institutional view’ toward full capital account openness as well as being meaningful to further financial integration in East Asia.

The limits to FinTech unveiled by the financial geography of Latin America

To address the paucity of research on the financial geography of Latin America and contribute to the emerging geographical literature on FinTech, we use quantitative financial data and qualitative insights from expert interviews, to explore the relationships between FinTech development and financial geography of the region, with focus on Brazil, Mexico and Argentina. We show that despite its fast growth driven by high costs of financial intermediation, policy of financial inclusion and financial regulation, FinTech in Latin America has thus far played out on the margins of the global FinTech industry and the margins of its financial systems, with limited impacts on financial inclusion. We argue that FinTech has not challenged but contributed to an already high level of concentration in the geographies of financial services in Latin America. This is affected by the proximity of FinTech firms to incumbent banks (which are active in FinTech), sources of capital and skilled labour, and reinforced by the fact that leading financial centres in Latin America are also the main centres of technology industry. Finally, we demonstrate that FinTech has not yet had a significant impact on the low level of financial integration in Latin America, with fragmentation determined by political, economic, and financial instability, combined with a lack of compatibility in financial regulation. Put together, our findings add to the literature that advocates a degree of scepticism about the impacts of FinTech on financial centres, if not the financial system overall.

How Does International Financial Integration Really Affect Post-Transition Countries' Growth? Empirical evidence from the CEE-10 countries

Abstract This paper seeks to empirically explore how an international financial integration influences a country’s GDP growth. The long run relationship is tested by PMG estimator for the sample of ten EU countries from Central, Eastern and Southeastern Europe (CEE-10 countries) between 1995 and 2017. Prior to the conducting of dynamic panel analysis based on PMG estimators, several panel unit root tests were conducted, as well as panel co integration tests. The findings offer mixed impact financial integration on growth. Among the measures of financial integration, growth of the CEE-10 countries is mostly driven in the long run by FDI inflows as well as remittances and financial openness. On the contrary, the study suggests a reversal relationship between growth and financial integration measured by Gross Foreign Assets and Liabilities in percentages of GDP. It might be explained with a fact that CEE-10 countries have not yet reached a certain level of financial development in order to benefit from financial integration. The study concludes that international financial integration does not per se enhance economic growth and country’s growth in the CEE-10 countries can be reached at a higher level of financial integration, further increase their financial openness and financial development.

GENERAL PATTERNS AND PARTICULARITIES OF THE INTEGRATION IN THE EU AND THE EAEU. ASSESSMENTS OF RUSSIAN RESEARCHER RUSTAM KASYANOV

The article gives a detailed assessment of the contents of the monograph "Regulation of the financial services market under the EU and EAEU law" written by Rustam Kasyanov. The work is devoted to the analysis and comparison of the key features of financial integration in the EU and the EAEU, including creation of a single market for the EU financial services and a common financial market of the EAEU. The issue under study is of particular relevance, since both unions intend to reach the same level of financial integration. It is also planned to create a supranational body for regulation of the common financial market of the EAEU according tothe EU example. Kasyanov's monograph was highly appreciated in academic circles as long as it describes a set of legal mechanisms for creation and functioning of a single market for the EU financial services that can be used to provide legal support for financial integration in the EAEU.

A Survey of Literature on Measurement of Financial Integration: Need, Challenges, and Classification

ABSTRACT Through a survey of literature in the measurement of financial integration (FI), this study explores the historical footprints on the measurement of financial integration, key issues, and challenges. We document the evolution of measurements during 1980–2018 and extend the measurement classification with specific criteria associated with the measurements. Furthermore, this study identifies the strength and weaknesses of existing measurements and highlights the need and criteria for choosing an appropriate measure. Finally, our study concludes that as one of the pillars of globalization, appropriate quantification of FI is a major challenge and crucial for monitoring the level and effect of FI for an economy.

Organizational integration, practice capabilities, and outcomes in clinically complex medicare beneficiaries.

To assess the association between clinical integration and financial integration, quality-focused care delivery processes, and beneficiary utilization and outcomes. Multiphysician practices in the 2017-2018 National Survey of Healthcare Organizations and Systems (response rate 47%) and 2017 Medicare claims data. Cross-sectional study of Medicare beneficiaries attributed to physician practices, focusing on two domains of integration: clinical (coordination of patient services, use of protocols, individual clinician measures, access to information) and financial (financial management and planning across operating units). We examined the association between integration domains, the adoption of quality-focused care delivery processes, beneficiary utilization and health-related outcomes, and price-adjusted spending using linear regression adjusting for practice and beneficiary characteristics, weighting to account for sampling and nonresponse. 1604580 fee-for-service Medicare beneficiaries aged 66 or older attributed to 2113 practices. Of these, 414209 beneficiaries were considered clinically complex (frailty or 2+chronic conditions). Financial integration and clinical integration were weakly correlated (correlation coefficient=0.19). Clinical integration was associated with significantly greater adoption of quality-focused care delivery processes, while financial integration was associated with lower adoption of these processes. Integration was not generally associated with reduced utilization or better beneficiary-level health-related outcomes, but both clinical integration and financial integration were associated with lower spending in both the complex and noncomplex cohorts: (clinical complex cohort: -$2518, [95% CI: -3324, -1712]; clinical noncomplex cohort: -$255 [95% CI: -413, -97]; financial complex cohort: -$997 [95% CI: -$1320, -$679]; and financial noncomplex cohort: -$143 [95% CI: -210, -$76]). Higher levels of financial integration were not associated with improved care delivery or with better health-related beneficiary outcomes. Nonfinancial forms of integration deserve greater attention, as practices scoring high in clinical integration are more likely to adopt quality-focused care delivery processes and have greater associated reductions in spending in complex patients.

Analysis of distinct asymmetries in financial integration‐growth nexus for industrial, emerging and developing countries

AbstractThis paper examines the threshold conditions in financial integration and growth relationship for a large set of threshold variables and different income group of countries employing Panel Smooth Transition Regression Models. Except developing countries, our findings strongly indicate nonlinear dynamics and imply that the impact of financial integration on growth is asymmetric depending on a number of indicators such as countries' degree of institutional quality, financial sector development, trade openness, budget deficit, inflation volatility and the level of financial integration. Our results show that these threshold effects substantially differ for emerging and industrial countries. As far as whole set of countries is concerned, our findings imply that countries having developed financial systems, qualified institutions and stable macroeconomic environment benefit from financial integration. Moreover, threshold effects are stronger and different for emerging countries compared to the industrial countries. Unlike emerging economies, higher levels of financial integration and trade openness decrease benefits from financial openness for the industrial countries. Besides, high fiscal deficit has more pronounced negative effect on the growth of the industrialized countries compared to emerging economies and other indicators.

Integration of African Stock Markets with the Developed Stock Markets: An Analysis of Co-Movements, Volatility and Contagion

ABSTRACTThis paper investigates evidence of integration and contagion between major African stock markets (ASMs) and developed stock markets during the periods of global financial crisis (GFC) and Eurozone sovereign debt crisis (ESDC). Specifically, it examined whether the co-movement between ASMs and developed stock markets during the two crisis periods is related to their level of financial integration or due to contagion. The study finds limited evidence of integration between ASMs and developed markets. However, the analysis of dynamic correlations shows that the conditional correlations are typically positive and higher during the periods of crisis, indicating substantial evidence of contagion. These findings suggest that the observed co-movements between stock markets during the crises were mainly due to contagion. The findings of this paper have several implications with respect to financial market stability, portfolio diversification and policy interventions.

Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Equity Markets

The aim of this paper is to analyse integration and test the hypothesis of an efficient market, in its weak form, in sixteen international financial markets. The sample covers the period from January 2002 to July 2019 and is divided into three sub-periods. In order to achieve such an analysis, the aim is to provide answers to two questions. Has the global financial crisis intensified the financial integration of international markets? If there is a process of mean-reversion in the international stock markets, with arbitrage, the hypothesis of portfolio diversification will be feasible? The results suggest that the global financial crisis has intensified the integration level of international financial markets. Regarding random walk and market efficiency hypotheses, in its weak form, the results suggest the existence of a mean-reversion and the rejection of the hypothesis of information efficiency, in its weak form, in developed and emerging markets, European and non-European. In terms of portfolio diversification analysis, we see that levels of financial integration decreased significantly in the sub-period following the global financial crisis, namely with its respective benchmarks, such as the US market, Japan and Hong Kong. We can assess the existence of feasible diversification opportunities in the long term.

Impact of Financial Integration on Ethiopian Economic Growth

This paper analyzes theoretically the role of financial integration on economic growth and empirically examines the influence of financial integration on Ethiopian economic growth. Many researchers find different investigation results during their data analysis on the impact of financial integration on economic growth. The outcome of most researchers indicate that financial integration has a positive contribution to economic growth, while the result of quite a few numbers of researchers suggested that financial integration has a negative influence on economic growth. Similarly, few of them propose that the relationship between these two variables as bi- directional. Furthermore, literatures categorize the impact of financial sector on economic growth into four basic hypotheses. Which are supply leading, demand following, bidirectional, and independent hypothesis. These hypotheses suggest that financial integration has different role on economic growth and all of them are supported by several research results of various researchers. It is considered that the main reason behind these contrasting research results are the level of financial integration and the composition of financial flows. Moreover, the financial crises that occur in recent decades created a heated debate among researchers on the advantages and disadvantages of financial integration. However, most economists agree that financial integration is beneficial to the economy. The result of this paper analysis also shows, financial integration has a positive impact on the Ethiopian economic performance.