TY  - JOUR
AU  - Kalemli-Ozcan,Sebnem
AU  - Papaioannou,Elias
AU  - Peydró,José-Luis
TI  - What Lies Beneath the Euro's Effect on Financial Integration: Currency Risk, Legal Harmonization, or Trade?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15034
PY  - 2009
Y2  - June 2009
UR  - http://www.nber.org/papers/w15034
L1  - http://www.nber.org/papers/w15034.pdf
N1  - Author contact info:
Sebnem Kalemli-Ozcan
Koc University
CASE 101
34450 Highway Rumelifeneri
Sariyer Istanbul
Turkey
E-Mail: sebnem.kalemli-ozcan@mail.uh.edu

Elias Papaioannou
Department of Economics
Dartmouth College
6106 Rockefeller Hall
Hanover, NH 03755
Tel: 603/646-8169
E-Mail: papaioannou.elias@gmail.com

José-Luis Peydró
Universitat Pompeu Fabra
E-Mail: jose.peydro@gmail.com
AB  - Although recent research shows that the euro has spurred cross-border financial integration, the exact mechanisms remain unknown. We investigate the underlying channels of the euro's effect on financial integration using data on bilateral banking linkages among twenty industrial countries in the past thirty years. We also construct a dataset that records the timing of legislative-regulatory harmonization policies in financial services across the European Union. We find that the euro's impact on financial integration is primarily driven by eliminating the currency risk. Legislative-regulatory convergence has also contributed to the spur of cross-border financial transactions. Trade in goods, while highly correlated with bilateral financial activities, does not play a key role in explaining the euro's positive effect on financial integration. 
ER  -