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Foreign banks, financial crises and economic growth in Europe

Author

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  • Schnabel, Isabel
  • Seckinger, Christian

Abstract

Using industry data from Eurostat and applying the Rajan-Zingales methodology, we investigate the short-run real growth effects of foreign bank presence in the European Union. Our sample stretches from 2000 until 2012 and includes the phase of rapid financial integration before the global financial crisis as well as the following phase of financial fragmentation and bank deleveraging. We find evidence that foreign bank presence had a more than four times stronger growth effect during the crisis than in normal times. Growth effects are also stronger in times of domestic bank deleveraging. In light of these results, we conclude that a reintegration of the European banking sector is an important building block of future growth perspectives in the European Union.

Suggested Citation

  • Schnabel, Isabel & Seckinger, Christian, 2019. "Foreign banks, financial crises and economic growth in Europe," Journal of International Money and Finance, Elsevier, vol. 95(C), pages 70-94.
    • Handle: RePEc:eee:jimfin:v:95:y:2019:i:c:p:70-94
    DOI: 10.1016/j.jimonfin.2019.02.004
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    Citations

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    Cited by:

    1. Hoffmann, Mathias & Maslov, Egor & Sørensen, Bent E., 2022. "Small firms and domestic bank dependence in Europe's great recession," Journal of International Economics, Elsevier, vol. 137(C).
    2. Andreea Maura Bobiceanu & Ioana Georgiana Fä‚Rcaè˜, 2022. "Covid Crisis Effects On Non-Performing Loans In The Romanian Banking Market," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 30, pages 25-37, December.
    3. Igan, Deniz & Mirzaei, Ali, 2020. "Does going tough on banks make the going get tough? Bank liquidity regulations, capital requirements, and sectoral activity," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 688-726.
    4. Gill, Andrej & Heller, David, 2024. "Leveraging intellectual property: The value of harmonized enforcement regimes," Journal of Banking & Finance, Elsevier, vol. 163(C).
    5. Heller, David, 2024. "Financial market integration and the effects of financing constraints on innovation," Research Policy, Elsevier, vol. 53(4).
    6. Stef, Nicolae & Dimelis, Sophia, 2020. "Bankruptcy regime and the banking system," Economic Modelling, Elsevier, vol. 87(C), pages 480-495.
    7. Wu, Ming & Ohk, Kiyool & Ko, Kwangsoo, 2021. "Does cash-flow news play a better role than discount-rate news? Evidence from global regional stock markets," Journal of International Money and Finance, Elsevier, vol. 110(C).
    8. Donny TANG, 2020. "What determines the portfolio investment flows to Central and Eastern European Countries in the European Union 2001-2017?," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(625), W), pages 21-42, Winter.

    More about this item

    Keywords

    Financial fragmentation; Financial integration; Foreign banks; Cross-border lending; Economic growth; Financial crisis; Rajan-Zingales methodology;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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