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Journal of Financial Stability Vol. 24 2016

The resurgence of cultural borders during the financial crisis: The changing geography of Eurozone cross-border depositing

Harald Sander1,2,3; Stefanie Kleimeier2,4,3,5; Sylvia Heuchemer1

1 TH Köln - University of Applied Sciences · 2 Maastricht School of Management · 3 Maastricht University · 4 Stellenbosch University · 5 Open University of the Netherlands

Abstract

We investigate the impact of cultural borders on the geography of international finance during stable and crises times. We employ a unique data set that focuses on Eurozone cross-border depositing during the 1999–2011 period in a gravity-model framework. We find that cultural distance limits international financial integration over and above what can be expected from economic trade and transaction costs. While we provide evidence that cultural borders lost influence during a “Europhoria” phase after the introduction of Euro notes in 2002, our findings indicate that cultural borders resurge during the 2007/2008 financial crisis and severely limit financial integration.

DOI
10.1016/j.jfs.2016.04.003
Volume
24
Pages
12-26
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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