Financial integration and growth — Why is Emerging Europe different?

Causal Nexus between Financial Integration and Economic Growth : Does Nonlinearity Matter?

“…This means that researchers often neglect a possible nonlinear relation between these variables because the traditional Granger causality test, designed to detect linear causality, is ineffective in uncovering certain nonlinear relations (Baek andBrock 1992, Hiemstra andJones 1994). Recent empirical evidence, however, suggests that this relation is very likely to be nonlinear in that the growth effect of financial integration may vary under alternative economic or financial conditions (Kose et al 2011, Friedrich et al 2013, Malik 2015. In a number of earlier empirical studies, this type of nonlinear behavior has been parsimoniously captured by panel threshold regression models (Chen and Quang 2014).…”

Structural Reform and Productivity Growth in Emerging Europe and Central Asia

“…This is in sharp contrast with many experiences of capital inflows into other emerging market regions which, if anything, tended to have negative longer-term growth effects as they have not been accompanied by the same degree of deepening of economic and political ties with "creditor" economies (EBRD 2009;and Friedrich, Schnabel, and Zettelmeyer 2013). …”

Bank market power, factor reallocation, and aggregate growth

“…To identify the effect of regional differences in banking competition on SME growth by industry, we follow the strategy suggested by Rajan and Zingales (1998) and subsequently pursued by, for example, Claessens and Laeven (2005), Kroszner et al (2007) and Friedrich et al (2013).…”

“…Our identification strategy differs from several previous studies (Rajan and Zingales, 1998;Claessens and Laeven, 2005;Kroszner et al, 2007;Dell'Ariccia et al, 2008;Körner and Schnabel, 2011;Friedrich et al, 2013), in that we use a time-varying measure of ED. The EDs provide a sort of industry equilibrium in the dependence on external finance and also can filter out time-, country-, and industry-specific effects.…”

“…We estimate the extent to which aggregate growth is due to input growth, technical change, and resource reallocation. To identify the relationship between bank market power and growth components, we exploit the regional demarcation of banking markets in Germany, together with the difference in the structural dependence of firms on external finance across industries (Rajan and Zingales, 1998;Claessens and Laeven, 2005;Friedrich et al, 2013). In extending country-industry-level studies, we apply this difference-in-difference approach to explain industry-region-specific output components generated from firmlevel data.…”