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Convergence and Capital Flows in Europe: The Role of Financial Intermediation and Investor Quality

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  • Rémy Lecat

    (Banque de France)

  • Dorothée Pasquier de Franclieu

    (Banque de France)

Abstract

Economic convergence was a goal of the European Union and financial integration was part of the tools to achieve this goal. After decades of successful convergence and closer financial integration, these movements have slowed since the Great Financial Crisis. In this paper, we contribute to explaining these stylized facts by showing, in a country panel setting, with 2SLS estimates, that the positive impact on productivity growth of financial flows, and in particular those intermediated by the banking system, depends on the quality of financial intermediation in the recipient country, but also on the quality of investors in the investor countries.

Suggested Citation

  • Rémy Lecat & Dorothée Pasquier de Franclieu, 2024. "Convergence and Capital Flows in Europe: The Role of Financial Intermediation and Investor Quality," De Economist, Springer, vol. 172(2), pages 101-119, June.
  • Handle: RePEc:kap:decono:v:172:y:2024:i:2:d:10.1007_s10645-024-09434-6
    DOI: 10.1007/s10645-024-09434-6
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    References listed on IDEAS

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    More about this item

    Keywords

    Convergence; Capital flows; Productivity; European union;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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