Financial Regulation, Financial Globalization and the Synchronization of Economic Activity
Elias Papaioannou, Sebnem Kalemli-Ozcan and Jose Luis Peydro ,
( 68 )
Journal of Finance

We analyze the impact of financial globalization on business cycle synchronization utilizing a proprietary database on banks’ international exposure for industrialized countries during 1978– 2006. Theory makes ambiguous predictions and identification has been elusive due to lack of bilateral time-varying financial linkages data. In contrast to conventional wisdom and previous empirical studies, we identify a strong negative e↵ect of banking integration on output synchronization, conditional on global shocks and country-pair heterogeneity.

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