Banking Sector Integration and Economic Growth: Re-examination of the Impact of Financial Integration on Growth

Abstract

Despite the supposed importance of international financial integration, scholars are divided as to the impact of financial integration on economic growth, with no clear consensus. This study investigates the impact of banking sector integration on economic growth in a panel of 108 developed and developing countries. Using annual data from 2000-2015 and employing the panel quantile regression method, the results show that the banking sector integration on economic growth varies across income level. Banking sector integration is reported to have affected growth positively at very low income level but it has negative impact for middle income level. Banking integration has no impact on growth at upper low income and high income levels.