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Journal of Economic Integration 2017 June;32(2) :244-282.
DOI: https://doi.org/10.11130/jei.2017.32.2.244
Financial Harmonization and Industrial Growth : Evidence from the European Union
Zeynep Ozkok 
St. Francis Xavier University, Antigonish, Canada
Corresponding Author: Zeynep Ozkok ,Tel: +19028675855, Fax: +19028673610, Email: zozkok@stfx.ca
Copyright ©2017 Journal of Economic Integration
ABSTRACT
This study analyzes the growth effects of the Financial Services Action Plan of the European Commission, a set of directives that aim to harmonize European financial markets. Using a panel of 25 countries and 30 industries, we find that the standard specification predicts lower growth due to harmonization, though the negative effect is mitigated for industries that depend more on external finance. Controlling for the relative timing of the adoption, harmonization is shown to have a positive effect on growth. This finding is robust to including further controls, to splitting the sample into subgroups of countries, and to extending the model to a dynamic setting.

JEL Classification
F15: Economic Integration
F36: Financial Aspects of Economic Integration
F55: International Institutional Arrangements
G15: International Financial Markets
G28: Government Policy and Regulation
K4: Legal Procedure, the Legal System, and Illegal Behavior
O4: Economic Growth and Aggregate Productivity
Keywords: Financial Integration | Legal | Regulatory Harmonization | External Finance Dependence | European Union | FSAP
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