1. bookVolume 10 (2021): Issue 3 (September 2021)
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11 Mar 2014
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access type Open Access

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

Published Online: 06 Sep 2021
Page range: 117 - 136
Received: 13 Apr 2020
Accepted: 09 Sep 2020
Journal Details
License
Format
Journal
First Published
11 Mar 2014
Publication timeframe
3 times per year
Languages
English
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.

Keywords

JEL Classification

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