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Financial Integration and Risk-Adjusted Growth Opportunities

Author/Editor: De Nicoló, Gianni | Ivaschenko, Iryna V.
Authorized for Distribution: May 1, 2008
Electronic Access: Free Full Text (PDF file size is 638KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: This paper documents the evolution of measures of financial integration for major advanced and emerging markets economies, assesses whether advances in integration have had a significant positive impact on countries' risk-adjusted growth opportunities, and identifies some of the channels through which financial integration may foster growth. Three main results obtain. First, financial integration has progressed significantly worldwide, particularly in emerging markets, and regional integration has advanced at the fastest pace in Europe. Second, a country's speed of integration predicts future country's risk-adjusted growth opportunities, while improved risk-adjusted growth opportunities predict future advances in integration, indicating that the countries whose integration has been faster may have benefited most from a virtuous dynamics in which financial integration and improved real prospects are mutually reinforcing. Third, financial integration predicts globalization but the reverse does not necessarily hold, while advances in financial integration predict advances in financial development and improvements in the liquidity of equity markets.
 
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Series: Working Paper No. 08/126
Subject(s): Economic integration | Developed countries | Developing countries | Globalization | Liquidity | Financial risk
Author's keyword(s): financial integration | growth opportunities | globalization | openness | financial development | liquidity
 
English  
    Published:   May 1, 2008        
            Format:   Paper
    Stock No:   WPIEA2008126   Pages:   24
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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