Foreign-owned banks and foreign trade in CESEE countries – a growth-enhancing duo?

ABSTRACT

Based on a sample of 14 Central, Eastern and Southeastern European (CESEE) countries during the period between 1995 and 2015, we analyse how foreign-owned banks and foreign trade impact economic growth. To date, studies have concentrated on the interlinkages between different forms of foreign bank presence (cross-border flows, branches, subsidiaries and syndicated loans) and the scale of foreign trade (imports and exports). Our approach is novel because we analyse the impact of the similarity between the geographical structures of foreign-owned banks and foreign trade on economic growth. We find that this similarity is not conducive to economic growth and reduces the benefits of a country’s openness to trade.

KEYWORDS:

• Economic growth
• foreign trade
• foreign-owned banks
• post-communist economies

JEL CLASSIFICATION:

• O11
• F15
• F36
• F43
• P33

Acknowledgments

This work was supported by the Polish National Science Centre (NCN) under Grant Number UMO-2014/13/B/HS4/01619. The opinions expressed herein are those of the authors and do not reflect those of the associated institutions.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Moldova, Poland, Romania, Serbia, Slovenia, Slovakia and Ukraine.

Additional information

Funding

This work was supported by the Polish National Science Center (NCN) [Grant number UMO-2014/13/B/HS4/01619.].