In Table 4, we consider the following set of financial centre characteristics: First, we add a dummy variable for Eastern European. This dummy is intended to capture the historically close link between these countries and the Euro Area. Historically, the D-Mark has been used in several Eastern European countries as a second currency. Also, in some countries, the degree of Euroization is quite high, as they anticipate being future members of the EMU. This dummy variable has indeed a positive sign but is statistically insignificant. Secondly, we add variables to capture the colonial history of the financial centre as well as the legal origin. If the legal origin is either German or French, or if the financial centre has a colonial past with any of the Eurozone member countries, the dummy variable is one, and zero otherwise. Finally, to follow up on the results in the previous table, we add a dummy variable that is equal to one if the financial centre can be classified to be a bank-based systemFootnote 13. If it is market-based, the dummy variable is equal to zero. Similarly, to the previous tables, we find that all variables are statistically insignificant at conventional levels. The only variable that is significant at 10%, the legal origin, has the expected sign. However, when looking at the R-square, we see that only very little is added to explain the overall variation in the dataFootnote 14.
Westermann Tables 345.pdf
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