THE IMPACT OF REGULATORY QUALITY ON DEEPENS LEVEL OF FINANCIAL INTEGRATION: EVIDENCE FROM THE EUROPEAN UNION COUNTRIES (NMS-10)

Azra  Ahmić; Ilma   Isović

doi:10.2478/eoik-2023-0004

Authors

Azra Ahmić nternational University Sarajevo, Faculty of Business and Administration, Sarajevo, Bosnia and Herzegovina
Ilma Isović International University Sarajevo, Faculty of Business and Administration, Sarajevo, Bosnia and Herzegovina

DOI:

https://doi.org/10.2478/eoik-2023-0004

Keywords:

regulatory quality, financial integration, international financial integration, Granger causality, New member states (NMS-10)

Abstract

This study seeks to empirically explore whether the regulatory quality in the NMS-10 impacts deepening international financial integration and whether the strengthening of regulatory quality for NMS-10 has a causal effect on the level of international financial integration (IFI) in NMS-10. The study covers NMS-10 between 1995 and 2020. The estimation of parameters was made with descriptive statistics, the Breusch-Pagan test, the Pesaran test, the Granger causality test, and OLS regression to analyze the impact of REQ on IFI. The findings of the study reveal that regulatory quality has a statistically significant effect in deepening the process of financial integration for both periods, in the pre-accession and postaccession EU process. In addition, the results demonstrate that the regulatory quality of NMS-10 provides sound laws and policies that support the business environment, encourage cross-bordering financial transactions. Moreover, the results of the Granger causality test show that the level of global financial integration is causally impacted by the improvement in NMS-10 regulatory quality. This indicates that regulatory effectiveness might predicts international financial integration.

Author Biographies

Azra Ahmić, nternational University Sarajevo, Faculty of Business and Administration, Sarajevo, Bosnia and Herzegovina

Ilma Isović , International University Sarajevo, Faculty of Business and Administration, Sarajevo, Bosnia and Herzegovina

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