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Key Facts

  • Project Start: Feb 15 2008
  • Project End: Feb 14 2010
  • Coordinator: German Institute for Economic Research (DIW Berlin)
  • EU Contribution:
    998 170 EUR

    • // FINESS Flyer

    Upcoming Events

  • May 10-11 2010, Brussels: International Policy Conference

    • // Programme

    Recent Events

  • April 26 2010, Berlin: Advisory and Steering Committee Meeting

  • January 2010: 4th Steering Group Meeting

  • Sept 14 2009, Berlin: 3rd Steering Group Meeting

  • March 5-6 2009, Berlin: International Scientific Conference

  • March 6 2009, Berlin: 2nd Steering Group and Advisory Committee Meeting

  • Sept 8 2008, Berlin: 1st Steering Group Meeting

  • Feb 22 2008, Berlin: Kick-off Meeting

    • Consortium

    Project Structure

    WP5: FINANCIAL MARKET INTEGRATION IN THE NEW MEMBER STATES

    Objectives

  • To explore the beneficial and potentially harmful effects of banking sector competition in the New Member States and to derive instructive regulation strategies.
  • To analyse the impact of foreign bank ownership on the loan supply of firms in the New Member States. To examine the impact of foreign bank ownership on the productivity growth of firms.
  • To review the costs and benefits of euro adoption.
  • To explore the causes and risks of foreign currency borrowing to households and small enterprises in some New Member States.

    • Work description

  • Analysis of banking sector competition and macroeconomic performance
    The linkages between financial sector competition and macroeconomic performance (i.e. productivity, external balance, financial stability) are examined. Cross-country data on macroeconomic, institutional and banking sector variables are used, and the effects are explored by paneleconometric methods. Case studies of countries complement this analysis to highlight special features of financial systems and reveal lessons from past policy interventions.
  • Foreign banks and loan supply
     Combination of BvD Amadeus database (firm level balance sheets and income statements) and EUKLEMS (sectoral data on productivity and growth sources). Empirical investigation of the impact of foreign bank ownership on the firm creation and the loan supply of existing firms, depending on their specific characteristics, such as size and opacity.
  • Implications of euro adoption: the case of Bulgaria
     Review of the Bulgarian government strategy and estimation of costs and benefits for the Bulgarian economy from adoption of the euro as a legal tender.
  • Analysis of the causes of foreign currency borrowing and macroeconomic risks
    Identification of causes of foreign currency borrowing of households and small enterprises. Using survey data. The questionnaire registers basic socioeconomic characteristics, measures of financial culture and data on foreign currency debt. Survey covers a number of New Member States with and without significant foreign currency borrowing. Results are used to create a representative cross-sectional database on household and small business borrowers, and cross sectional econometric methods are applied. Potential magnitude of exchange rate movements on macroeconomic variables is determined.
  • Policy implications
     Policy relevant conclusions for the New Member States will address the role of prudential supervision and macroeconomic policies to financial stability in a period of rapid credit growth; the desirability of international financial integration for economic growth; the role of financial culture in individual decisions and its macroeconomic consequences; and a review of the costs and benefits from euro adoption.

    • Workpackage Leader: Gabor Pellenyi

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