Thresholds in the Process of International Financial Integration
The financial crisis has re-ignited the fierce debate about the merits of financial globalization and its implications for growth, especially for developing countries. The empirical literature has not been able to conclusively establish the presumed growth benefits of financial integration. Indeed,...
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2012
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| Online Access: | http://hdl.handle.net/10986/4801 |
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okr-10986-48012021-04-23T14:02:19Z Thresholds in the Process of International Financial Integration Ayhan Kose, M. Prasad, Eswar S. Taylor, Ashley D. Financial Aspects of Economic Integration F360 Financial Crises G010 International Financial Markets G150 The financial crisis has re-ignited the fierce debate about the merits of financial globalization and its implications for growth, especially for developing countries. The empirical literature has not been able to conclusively establish the presumed growth benefits of financial integration. Indeed, a new literature proposes that the indirect benefits of financial integration may be more important than the traditional financing channel emphasized in previous analyses. A major complication, however, is that there seem to be certain "threshold" levels of financial and institutional development that an economy needs to attain before it can derive the indirect benefits and reduce the risks of financial openness. In this paper, we develop a unified empirical framework for characterizing such threshold conditions. We find that there are clearly identifiable thresholds in variables such as financial depth and institutional quality--the cost-benefit trade-off from financial openness improves significantly once these threshold conditions are satisfied. We also find that the thresholds are lower for foreign direct investment and portfolio equity liabilities compared to those for debt liabilities. 2012-03-30T07:29:48Z 2012-03-30T07:29:48Z 2011 Journal Article Journal of International Money and Finance 02615606 http://hdl.handle.net/10986/4801 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo 4214 World Bank Journal Article |
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Digital Repository |
| institution_category |
Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
| language |
EN |
| topic |
Financial Aspects of Economic Integration F360 Financial Crises G010 International Financial Markets G150 |
| spellingShingle |
Financial Aspects of Economic Integration F360 Financial Crises G010 International Financial Markets G150 Ayhan Kose, M. Prasad, Eswar S. Taylor, Ashley D. Thresholds in the Process of International Financial Integration |
| relation |
http://creativecommons.org/licenses/by-nc-nd/3.0/igo |
| description |
The financial crisis has re-ignited the fierce debate about the merits of financial globalization and its implications for growth, especially for developing countries. The empirical literature has not been able to conclusively establish the presumed growth benefits of financial integration. Indeed, a new literature proposes that the indirect benefits of financial integration may be more important than the traditional financing channel emphasized in previous analyses. A major complication, however, is that there seem to be certain "threshold" levels of financial and institutional development that an economy needs to attain before it can derive the indirect benefits and reduce the risks of financial openness. In this paper, we develop a unified empirical framework for characterizing such threshold conditions. We find that there are clearly identifiable thresholds in variables such as financial depth and institutional quality--the cost-benefit trade-off from financial openness improves significantly once these threshold conditions are satisfied. We also find that the thresholds are lower for foreign direct investment and portfolio equity liabilities compared to those for debt liabilities. |
| format |
Journal Article |
| author |
Ayhan Kose, M. Prasad, Eswar S. Taylor, Ashley D. |
| author_facet |
Ayhan Kose, M. Prasad, Eswar S. Taylor, Ashley D. |
| author_sort |
Ayhan Kose, M. |
| title |
Thresholds in the Process of International Financial Integration |
| title_short |
Thresholds in the Process of International Financial Integration |
| title_full |
Thresholds in the Process of International Financial Integration |
| title_fullStr |
Thresholds in the Process of International Financial Integration |
| title_full_unstemmed |
Thresholds in the Process of International Financial Integration |
| title_sort |
thresholds in the process of international financial integration |
| publishDate |
2012 |
| url |
http://hdl.handle.net/10986/4801 |
| _version_ |
1764392813516029952 |