NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Deep Financial Integration and Volatility

Sebnem Kalemli-Ozcan, Bent Sørensen, Vadym Volosovych

NBER Working Paper No. 15900
Issued in April 2010
NBER Program(s):   CF   IFM   ITI   PR

We investigate the relationship between financial integration and output volatility at micro and macro levels. Using a very large firm-level dataset from EU countries over time, we construct a measure of "deep" financial integration at the regional level based on foreign ownership at the firm level. We find a positive effect of foreign ownership on volatility of firms' outcomes. This effect survives aggregation and carries over to regional output. Exploiting variation in the transposition dates of EU-wide legislation, we find that high trust regions in countries who harmonized capital markets sooner have higher levels of financial integration and volatility.

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Document Object Identifier (DOI): 10.3386/w15900

Deep Financial Integration and Volatility (with Bent Sørensen and Vadym Volosovych), Journal of European Economic Association, forthcoming.

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