Process Of Financial Integration Research Articles

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.

Index of Economic Stability and Financial Integration of Small Open Countries

Over the recent decades, we have witnessed advanced processes of liberalization of capital flows, and increasing integration and globalization of financial markets. Along with the globalization trend, ever since the end of the 1980s, the process of financial integration has also been taking place, as a consequence of removing barriers to free movement of capital between countries. Therefore, this research explores financial integration of small open countries and aims to make conclusions on how this integration can affect their economic stability. Qualitative definitions of small countries point out that they typically have a limited territory, relatively small population and limited resources. The research hypothesis is postulated as follows: the economic stability index of small open countries is conditioned by their financial integration. The analysis includes small open countries of Southeast Europe observed from 2005 to 2020, with relevant statistical data used for the total inflow and outflow of investments, the share of assets and liabilities in gross domestic product and the calculated value of the economic stability index. The analysis was made using the methods of correlation analysis and correlation test. The results show that there is a correlation between financial integration and the economic stability index in small open countries.

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.

Flexibility Versus Fixity of Exchange Rate Regimes in Developing Countries: An Empirical Assessment of Macroeconomic Effects

The process of financial integration initiated by developed countries has been accompanied by a flexible exchange rate regime which is based on market supply and demand. A regime considered as being more acceptable for developed countries in a liberal context. However, developing countries, with their own economic structures, often find it difficult to choose an optimal exchange rate regime for their economies. Although many countries are floating their exchange rate regimes, touting its superiority over other exchange rate regimes, fixed exchange rates are still a resilient regime that can economically compete with flexibility. In this context, this study being presented has taken the liberty to econometrically study through panel data, the evaluation of the macroeconomic effects of exchange rate regimes on a set of emerging and developing countries through the periods of 2000-2016.

Corporate social responsibility, financial globalization and bank soundness in Europe – Novel evidence from a GMM panel VAR approach

Based on macro and micro perspectives, this paper is a pioneering effort to study the causal relationship between corporate social responsibility (CSR), bank soundness (profitability, stability) and financial globalization in the European banking sector. The results show that CSR performance enhances bank stability, while the financial costs of CSR can reduce bank profitability. We also reveal a virtuous circle between financial globalization and bank soundness, as well as a positive effect of financial globalization on CSR. However, the divergence between local and foreign CSR practices in the banking sector can hinder the financial integration process.

Optimization of Enterprise Financial Management and Decision‐Making Systems Based on Big Data

Based on information asymmetry theory, principal‐agent theory, and risk management theory, this paper analyzes the mechanism of the impact of big data on financial decision‐making, analyzing four dimensions: how big data enhances the information base for forecasting, how big data improves the relevance of decision‐making, how big data builds new competitive advantages, and how big data promotes dynamic decision‐making. Secondly, through the analysis of specific implementation cases of enterprise big data in financial decision‐making, we focus on the real problems faced in management and the effect of solving problems through big data platform. The enterprise realizing the integration of business and finance not only can better lead business expansion, but also can improve the management level within the enterprise, which is conducive to the improvement of core competitiveness. The integration of industry and finance is essentially achieved through the application of various financial management modules to the business operations of enterprises, including budget management, capital management, fixed asset management, and financial accounting. If we want to implement the whole process of financial integration, it is impossible to achieve this manually, and we must first build a powerful information system as a guarantee. Under the guidance of theories of information asymmetry, stakeholders, and management information systems, Internet finance enterprises should build their own integrated business finance system based on the demand for business finance integration in the Internet finance industry, to enhance the matching of business finance data of Internet finance enterprises, improve the efficiency of enterprise management, and realize business finance integration. Finally, through the research of this paper, we hope to provide reference for other similar enterprises to apply big data for financial decision‐making. Through the application of big data, higher economic benefits are achieved in procurement management, production control, capital budget, and investment decision compared with the previous ones. It is concluded that in the era of big data, massive data can be used to serve enterprise decision‐making in depth, which can break the business and financial barriers, improve the efficiency and quality of decision‐making, optimize the organizational structure and personnel, and enhance the prediction and early warning capability. The application of big data tools has become the key to assisting financial decision‐making and enhancing enterprise value.

The Innovative Impact of Insurance for Economic Growth: The Evidence from New EU Member States

Abstract Insurance market activity, both as a financial intermediary and a provider of risk transfer and indemnification, may contribute to economic growth by allowing different risks to be managed more efficiently and by mobilizing domestic savings. During the last decade, there has been faster growth in insurance market activity, particularly in emerging markets given the process of liberalization and financial integration, which raises questions about its impact on economic growth.The aim of this paper is to examine relationship between insurance sector development and economic in 11 new EU member states from CentralandEasternEurope, using annual data fortheperiod 1999-2018. We apply dynamic and fully modified ordinary least squares to estimate the relationship between the variables. The results of our study indicate there are a positive and a significant relationship between insurance, measured through penetration, and economic growth Thus, functions of insurance companies - providing means of risk management and performing mobilization and allocation of resources - are important for economic growth and is in line with previous studies and with our hypothesis These results could be useful for regional governments that seek to improve economic growth as they suggest the need for implementation of stimulative policies for the development of insurance industry

Is portfolio diversification possible in integrated markets? Evidence from South Eastern Europe

A remarkable process of financial integration has taken place throughout the world capital markets over the last decades. In line with this integration process, the effect of financial integration locally and/or globally has been one of the contemporary topics of interest to academics, practitioners as well as policy makers. In this study, we investigate the availability of portfolio diversification benefits after the initiation of the South Eastern Europe Link (the SEE Link) trading platform in 2016 as a connecting hub for stock markets in the South Eastern European region. Our empirical methodology is primarily based on various static and dynamic correlation (Dynamic Conditional Correlation-GARCH) and regression (Autoregressive Distributed Lag, Fully Modified Ordinary Least Squares, Dynamic Ordinary Least Squares, Markov Switching Regression Model and Kalman Filter Model) analyses. We employ our methods for a daily frequency stock exchange (namely, the Zagreb Stock Exchange and Bulgarian Stock Exchange) return data between January 4, 2005 and December 30, 2019. The findings reveal that the two stock exchanges have a significantly decreasing pattern of correlation and regression relationship over the sample period implying the existence of diversification opportunities in the SEE Link markets.

Real Exchange Rate Volatility and Financial Integration: Evidence from Latin American Countries

This research is an endeavor to reveal the dynamic association of real exchange rate volatility with real and monetary shocks and particularly with international financial integration in selected eight Latin American countries during 1992-2018. The estimation strategy employed in this research is the Generalized Method of Moments (GMM) to empirically obtain consistent estimates. Empirical results strongly supported the significant negative impact of financial integration on real exchange rate volatility when financial integration is approximated by the Chinn-Ito index. Furthermore, output volatility and money supply volatility both significantly contributed to increasing real exchange rate instability. An important policy implication is that process of financial integration needs to be more strengthened and shocks to output and money supply needs to be reduced to achieve lesser fluctuations of the real exchange rate in Latin American countries.

Approaching Monetary Integration in the Context of the Imperative to Ensure the Sustainable Growth in the EU

Sustainable economic growth is an essential objective at the European Union level. The purpose of this paper is to investigate the impact of monetary integration on economic growth, assuming that the introduction of the euro significantly stimulated the process of European financial integration. We used a fixed-effects methodology for panel data for the EU 28 countries for the period 2004–2018. We find that the main factors through which monetary integration contributessignificantly and positively to economic growth areeconomic growth Single Euro Payments Area (SEPA)cards, trade, monetary freedom, convergence of interest rates, convergence of exchange rates and cross-border holdings of short-term debt, with significant differences between Eurozone and non-euro countries, which confirms the hypothesis that the introduction of the euro had a significant impact on economic and financial integration.

Macroprudential ring-fencing

PurposeThis paper aims to focus on capital-related macroprudential policies in the context of recent policy discussions on the removal of barriers to the mobility of capital and liquidity of cross-border banks in the European Union (EU).Design/methodology/approachThis study first discusses the link between financial stability and internal resource mobility of cross-border banks. Then, it examines past heterogeneity in structural capital buffers as key macroprudential capital instruments applied in the EU and relate them to costs of policy action, degree of foreign penetration and membership in the Banking Union.FindingsObserved phase-in patterns of structural capital buffers in the EU are broadly consistent with costs of policy action, degree of foreign penetration and membership in the Banking Union as potential factors. The process of financial integration could be further enhanced through reduced uncertainty in the application of macroprudential policies that constrain capital mobility of cross-border banks.Originality/valueThis paper anchors macroprudential policies into a wider discussion on the mechanism and implications of ring-fencing in the EU over time. It discusses two policy areas, macroprudential policies and proposals for deeper financial integration, that share the same financial stability objective but tend to emphasize different implications of the mobility of capital and liquidity of cross-border banks in the EU. The study provides a discussion of potential implications of the recent adoption of the CRRII/CRDV legislation for future heterogeneity of macroprudential policies in the EU.

Характеристика фінансових циклів: світовий досвід та Україна.

The analysis of financial cycle indicators for developed and developing countries is carried out. They were compared to those of Ukraine. The analysis of the dynamics of relevant indicators revealed the characteristic tendencies of manifestation the financial cyclical at the present stage. The correlation between the aggregate indicators of two groups of countries and Ukraine is investigated.The tendencies of local financial cycles to joint movement and the mutual nature of cyclicality are analyzed, the reason of it is the financial integration and globalization processes. Comparison of the amplitude of the fluctuations of the global and local financial cycles has shown a growing level of interdependence. The regularities of the impact of changes in the global financial cycle on the local are determined and the level of sensitivity of financial cycles of individual groups of countries to cyclical shifts of each other is estimated.

Money and the ‘Level Playing Field’: The Epistemic Problem of European Financial Market Integration

ABSTRACT Financial market integration processes in the European Union (EU) are characterised by an epistemic problem of economic theory. This problem encompasses what ‘the market’ is, how it is to be ‘integrated’, and the nature and role of ‘money’ as infrastructure of the fully integrated market. The EU’s legal framework has imported this epistemic problem along with the competitive conception of the market as described in economic theory – as a ‘level playing field’ for private exchange, under free, fair and ideally unrestrained competition. It manifests itself in European financial market integration processes, as exemplified in the article, via two otherwise disconnected areas of European Central Bank (ECB) activity: (a) the provision of central bank credit for the purpose of financial transaction settlement in the Eurozone; and (b) the conduct of ordinary monetary policy in the Eurozone. While the problem can be stabilised through legal, technical and other means, it remains latent, and may manifest itself again in unexpected ways, as happened in the wake of the 2008 financial crisis. Thus, contrary to ideologies that are widely understood as more or less coherent systems of doctrines, epistemic problems are characterised by specific tensions, contradictions and conceptual uncertainties.

MARKET EFFICIENCY, FINANCIAL INTEGRATION, AND SHOCK TRANSMISSION (EMPIRICAL EVIDENCE FROM D-8 ECONOMIES)

The specific purpose of the Developing-8 economies is to integrate the endeavours of each member countries to excel economic cooperation and facilitation among the Islamic countries to enhance the investment opportunities and not to put pressure on the geopolitical environment of the world. The purpose of this study is to visualize the market efficiency, financial integration, and shock transmission process in the D-8 Economies for the period from Jan 2011 to Dec 2016. Daily market data is taken for KSE, DSE, TSE, JCI, KLCI, ISE, EGX, and NSE equity markets. Unit Root Test, Serial Correlation Test, Runs Test, and Variance Ratio Test are used to test the market efficiency whereas Johansen Cointegration Test, Granger Causality Test, Vector Error Correction Model, and Impulse Response Test are used to test the financial integration and shock transmission. The performance of the Tehran stock market remained excellent during this study period. Mixed evidence is concluded regarding the market efficiency of D-8 equity markets. It is concluded that there exists a long-run relationship between KSE and DSE. Short-run relationship indicates that KSE has a significant positive short-run relationship with JCI and have a negative relationship with KLCI. Negative asymmetric behaviour is more influential in the negatively skewed markets and negative shocks have a greater effect than the positive shocks. Hence it is concluded that investors can get benefit from the arbitrage process due to market inefficiencies and through the short selling process. There is a need to establish economic equilibrium through the arbitrage process where investors may enjoy the opportunities to excel more economic stream of benefits by noise and market reverting behaviour. The economic integration will increase the cooperation among these economies to establish more growth opportunities in the trade and corporate investments. The implication of the studies suggests and directs to enhance mutual interface and co-operation including Banking and Finance, Human and Social Development, Energy Sector, Development of Rural Population, Science and Technology, Health and Environment, and Agriculture Sector. Moreover, there is a dire need for restructuring the economic and financial bylaws that may ease the financial liberalization and to enhance the dynamics of trading actives among the D-8 economies.

The Comovement of Exchange Rates and Stock Markets in Central and Eastern Europe

This paper analyses the link between exchange rates and stock markets in four Central and Eastern European countries. We simultaneously explore the comovements of foreign exchange markets and stock markets at the cross-country level and the link between these two markets within each country while employing a Dynamic Conditional Correlation Mixed Data Sampling (DCC-MIDAS) model. Such an approach to financial markets conveys a much more visible picture of the existing patterns of financial integration between these markets that would otherwise be neglected. The estimates reveal significant differences between the patterns of correlation in our sample countries. First, the paper finds a quite low degree of convergence between foreign exchange markets, with rising correlations during some of the crisis episodes. Second, both the 2004 European Union enlargement and the European sovereign debt crisis underpin the stock market comovements in the Central and Eastern European countries. Third, the correlations between the exchange rate returns and stock markets rise mostly during the European sovereign debt crisis and to a lesser extent during the global financial crisis, revealing signs of contagion and lower portfolio diversification opportunities. These results are of utmost relevance for the process of financial integration and they also have important implications for policy makers, risk management, and investors.

The Three Musketeers Relationships between Hong Kong, Shanghai and Shenzhen Before and After Shanghai–Hong Kong Stock Connect

This study examines the sustainability of financial integration between China (represented by Shenzhen and Shanghai) stock markets and Hong Kong stock market over the period of pre and post launch of the Stock Connect Scheme. This paper aims to fill the gap in the financial literature by providing empirical research on the dynamics of the financial integration process, and examining the sustainability of financial integration among the three Chinese stock markets. We apply cointegration and both linear and nonlinear causalities to investigate whether the Shanghai–Hong Kong Stock Connect has any impact on both market capitalizations and market indices of Hong Kong, Shanghai, and Shenzhen markets. Through cointegration tests and linear Granger causality techniques, it was found that the stock markets from mainland China are increasingly influencing the Hong Kong stock market after the introduction of the Stock Connect Scheme; however, when using nonlinear Granger causality analysis for confirming China market dominance, the result shows an reverse relationship whereby the Hong Kong stock market is still relevant to understand and predict China stock market after the introduction of the Stock Connect Scheme. Overall, our findings support the view that the Shanghai–Hong Kong Stock Connect has a significant impact on both market capitalizations and market indices of the Hong Kong, Shanghai, and Shenzhen markets, but Hong Kong stock market is still relevant to understand and predict China stock market after the introduction of the Stock Connect Scheme. The change in share premium difference between mainland China’s domestic A-share markets and Hong Kong’s H-share market could change investors’ appetites or sentiments. Further research includes examining whether there is any functional relationship including nonlinear relationship and studying the dynamic drivers of the relationships.

The Phenomenon of Financial Integration and the Probable Issues in Financial Alterations Related to EU

The financial integration concept is a very important main key, as an integration phenomenon, that haven taken place in EU, and effect on the member countries' financial reform process for a long time. In this study, we aim to put forth the financial relations between financial alterations and recent developments, which include along the capital movements especially together with the last full member countries. Therefore, we have interrogated two cross-examine related to financial integration fact. That is first of their financial market standards affecting financial harmonization adjustment process. Secondly, the financial risk-sharing and prudential policies' effect that take place in applications related to integration process. In addition to, the price-based policies have been emphasized along the occurred global risks which make sense cross-country dispersion of bond yields among banks in the EU. However, since the process of financial integration represents a process that aims to harmonize national debt limits between member states, it also presents a process where the money market transactions are also questioned among banks on a global level. In this respect, the global alignment of financial markets emerges as the objectives of joint financial change as well as the alignment of macro financial indicators for EU countries, and it appears that this fact makes corporate integrations inevitable among member countries.

THE DETERMINANTS OF FINANCIAL INSTABILITY IN EMERGING COUNTRIES

Financial integration has greatly contributed to economic growth and development around the globe, in particular for developing countries. However, this process of financial integration has also provided threats in the form of instability which threaten the progress of economic growth and development. The objective of this study is to examine a set of indicators which are valid and indicative of financial instability in the case of developing countries. A panel data of 17 developing countries during the period 2000–2017 is utilized. The credit growth is used as a proxy of financial instability. Standard methods such as the pooled OLS, fixed effect model and random effect model are considered to ensure robustness. Empirical findings from this study indicate that the key determinants of financial instability in developing countries including Vietnam include the GDP growth rate, inflation rate, the growth rate of base money, the change in foreign exchange reserves, lending interest rate, returns in the stock market and the return on equity ratio of the banking sector. Findings from this study appear to support the views of Post-Keynesians in relation to the mechanism leading to financial instability, in particular for developing markets.

Reconciling contradictory forces: financial inclusion of refugees and know-your-customer regulations

Providing access to financial services for asylum seekers and refugees is made difficult by know-your-customer financial regulations adopted as part of efforts to tackle money laundering and terrorist financing activities. Difficulties in identifying asylum seekers and refugees further complicate the urgent necessity of opening simple bank accounts, which is a crucial step towards integration. We review certain financial inclusion initiatives and assess European Union banking regulations from the perspective of offering financial services to asylum seekers and refugees. We conduct a novel survey of banks in the European Union to shed light on banks’ attitudes to the financial integration of refugees, their assessment of the relevant banking regulations and possible public–private partnerships to improve the financial integration process. We conclude that the solution to the financial inclusion problem is not to ease regulation, but to tailor it to the specific needs of refugees, while offering clear guidelines to banks and improving refugee identification. We make several recommendations, including the issuance of a European identification document to each refugee and the development of a pan-European registry of refugees.