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Ivie
VALENCIAN INSTITUTE OF ECONOMIC RESEARCH
The Fundación de Estudios Financieros (Financial Studies Foundation) presents the results from the Observatory of European Financial Market Reforms 2010
The crisis has had a negative impact on financial integration, according to a study conducted by the Ivie

During the crisis there has been a reversal of financial integration with its contribution to economic growth also decreasing, although it does remain positive. Broadly speaking, these are the two main results to emerge from the Observatory of European Financial Market Reforms 2010. The report includes an analysis, for the third consecutive year, on financial integration in Spain directed by Ivie researcher Joaquín Maudos. Listed below are the main findings of the analysis:

  • Although the crisis has had a negative impact on financial integration, since mid-2009 certain markets have seen a slowdown of this negative effect in the context of greater financial stability. The measures implemented to tackle the crisis have helped to recover part of the decline in the degree of integration which occurred with the outbreak of the crisis, but it has not returned to previous levels. However, the degree of integration varies depending on the financial market analyzed, being higher in wholesale than retail markets.
  • Spain is one of the countries in the EU-15 which has witnessed more significant growth in the size of financial markets since the introduction of the euro and the adoption of the Action Plan for Financial Services in 1999.
  • The effects of the crisis can be seen in financial development, but Spain remains one of the countries to have most benefited from European financial integration. Between 1999 and 2009 the contribution of financial development to GDP growth in the EuroZone is 0.15 percentage points per year, while Spain's growth is four times higher (0.65 points). During the crisis period of 2007-2009, the contribution of financial development to GDP growth is practically zero in the EuroZone (0.02 pp), but again is higher in Spain (0.17 pp).
  • Part of the returns associated with financial development are due to progress in the degree of integration. The report quantifies that between 1999 and 2009 GDP growth in the EuroZone associated with integration is at 0.023 percentage points per year, being 30% higher (0.03 percentage points per year) in Spain.
  • As a result of the crisis that began in the summer of 2007 the returns associated with integration have suffered, although they do remain positive. Given the fact that there is a contribution of 0.023 percentage points per year over the period 1999-2007, the contribution of integration in the EuroZone is only 0.007 percentage points per year between 2007 and 2009. In the case of Spain, however, although the returns associated with integration have decreased, the contribution is three times higher, with an annual contribution to GDP growth of 0.021 percentage points per year.
Further information:

Fundación de Estudios Financieros (FEF)
Observatory of Financial Integration