TY - JOUR
T1 - The real effects of financial (dis)integration
T2 - A multi-country equilibrium analysis of Europe
AU - Chakraborty, Indraneel
AU - Hai, Rong
AU - Holter, Hans A.
AU - Stepanchuk, Serhiy
N1 - Publisher Copyright:
© 2017 Elsevier B.V.
Copyright:
Copyright 2020 Elsevier B.V., All rights reserved.
PY - 2017/1/1
Y1 - 2017/1/1
N2 - Using data from 15 European Union economies, we quantify the real effects of supply-side frictions due to the financial disintegration of European countries since the 2008 financial crisis. We develop a multi-country general equilibrium model with heterogeneous countries and destination-specific financial frictions. Financial institutions allocate capital endogenously across countries, determining the cost of capital to firms and the wealth of nations. The cost of financial disintegration is reduced access to capital for firms which results in lower output. Financial disintegration leads to a 0.54% fall in output in Europe since the crisis. We also estimate benefits of further financial integration.
AB - Using data from 15 European Union economies, we quantify the real effects of supply-side frictions due to the financial disintegration of European countries since the 2008 financial crisis. We develop a multi-country general equilibrium model with heterogeneous countries and destination-specific financial frictions. Financial institutions allocate capital endogenously across countries, determining the cost of capital to firms and the wealth of nations. The cost of financial disintegration is reduced access to capital for firms which results in lower output. Financial disintegration leads to a 0.54% fall in output in Europe since the crisis. We also estimate benefits of further financial integration.
KW - Cross-border financing
KW - Europe
KW - Financial institutions
KW - Financial integration
KW - Global financial crisis
UR - http://www.scopus.com/inward/record.url?scp=85028255925&partnerID=8YFLogxK
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U2 - 10.1016/j.jmoneco.2016.11.003
DO - 10.1016/j.jmoneco.2016.11.003
M3 - Article
AN - SCOPUS:85028255925
VL - 85
SP - 28
EP - 45
JO - Journal of Monetary Economics
JF - Journal of Monetary Economics
SN - 0304-3932
ER -