Are Determinants of International Financial Integration in the European Transition Countries Different from Post-Transition Countries?

The paper seeks to empirically explore the variations and changes in the degree of
International Financial Integration (IFI) between the European Transition countries and Post-
Transition countries between 2000 and 2016. The estimation of parameters was made using the
Generalized Method of Moment (GMM) approach. The findings of the study reveal that European
Post-Transition countries have relatively more developed financial systems compared to European
Transition countries, where private credit market is still playing an overwhelmingly important role in a
financial system while stock markets are in an early stage of development constituting a relatively
small share of the financial system. Even though in Panel 3 there are significant control variables,
our findings reveal that IFI in European transition countries are affected neither by stock market
capitalization and private credit markets. Consequently, they can't be used in this stage of financial
development for explanation of variations and changes in the degree of IFI.