Has the European Financial Integration Promoted the Economic Growth Among the New European Union Countries?

Abstract

This study examines whether the European Monetary Union (EMU) has accelerated the economic growth among the Central and Eastern European Countries (CEEC) during 1997-2012. The larger stock market size has slightly boosted growth before the EMU membership. This is due to the anticipated positive effect of the stock market expansion. Second, the higher bank credit flows have slowed growth after the EMU membership. The reason is that the European Union (EU) bank dominance has reduced the bank competition. The results suggest that the CEEC have to implement much deeper stock market and bank reforms to boost their long-term growth.