EconStor >
Forschungsinstitut zur Zukunft der Arbeit (IZA), Bonn >
IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA) >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/35423
  
Title:Thresholds in the process of international financial integration PDF Logo
Authors:Kose, M. Ayhan
Prasad, Eswar S.
Taylor, Ashley D.
Issue Date:2009
Series/Report no.:IZA discussion papers 4133
Abstract: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.
Subjects:Financial openness
capital account liberalization
growth
threshold conditions
financial development
institutions
macroeconomic policies
JEL:F3
F4
O4
Persistent Identifier of the first edition:urn:nbn:de:101:1-20090513315
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

Files in This Item:
File Description SizeFormat
59940356X.pdf643.45 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/35423

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.