{
  "title": "The Integration of World Capital Markets",
  "publication": "IMF Working Papers, December 1, 1993",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/the-integration-of-world-capital-markets-1161",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2016/12/30/the-integration-of-world-capital-markets-1161",
  "overlayPath": "/en/publications/wp/issues/2016/12/30/the-integration-of-world-capital-markets-1161/index.md",
  "summary": "This paper discusses the extent to which national capital markets have become linked, and identifies several of the more important consequences of that increased degree of integration.",
  "sections": [
    {
      "heading": "Scope and objectives",
      "content": "- Discusses the extent to which national capital markets have become linked and identifies several important consequences of increased integration.\n- Reviews alternative approaches to the measurement of capital market integration, including:\n  - deviations from the law of one price,\n  - differences between actual and optimally diversified portfolios,\n  - correlations between domestic investment and domestic saving,\n  - cross-country links in consumption behavior.\n- Examines two recent episodes of large-scale international capital flows for insights into global capital market workings:\n  - the turmoil in the European Monetary System in the fall of 1992,\n  - the surge of capital inflows into Latin America during the last three years."
    },
    {
      "heading": "Key findings and analytical themes",
      "content": "- Capital market integration has multiple measurable dimensions; no single metric suffices. The paper emphasizes complementary measures:\n  - law of one price deviations as indicators of asset price convergence or segmentation,\n  - portfolio diversification gaps to assess cross-border investment barriers or preferences,\n  - investment–saving correlations to evaluate international capital mobility,\n  - consumption links to capture cross-country risk-sharing and financial market completeness.\n- Case studies provide empirical and institutional lessons:\n  - European Monetary System turmoil (fall of 1992) illustrates how integrated markets transmit shocks and affect exchange rate dynamics.\n  - Latin American capital inflows (surge during the last three years) illuminate the macroeconomic and policy challenges posed by large-scale international capital movements.\n- Concluding analytical remarks address:\n  - future development of international capital markets,\n  - implications for exchange rate management,\n  - alternative approaches to living with larger and more influential financial markets,\n  - financing of investment in the formerly centrally planned economies."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Exchange rate management: integration increases the transmission of external shocks, implying greater exchange-rate policy considerations in an integrated capital market environment.\n- Market-based discipline and regulation: larger, more influential financial markets require policy frameworks that acknowledge cross-border linkages and potential for rapid capital flow reversals.\n- Investment financing for transition economies: as formerly centrally planned economies engage with global capital markets, policy attention to appropriate financing instruments and market development is necessary.\n- No single policy prescription is offered; the paper sketches alternative approaches to managing the risks and opportunities from deeper international capital market integration.\n\n---\n\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/the-integration-of-world-capital-markets-1161"
    }
  ],
  "bullets": [
    "[Markdown version](/en/publications/wp/issues/2016/12/30/the-integration-of-world-capital-markets-1161/index.md)",
    "[Structured JSON version](/en/publications/wp/issues/2016/12/30/the-integration-of-world-capital-markets-1161/index.json)",
    "[Bundle manifest](/en/publications/wp/issues/2016/12/30/the-integration-of-world-capital-markets-1161/bundle-manifest.json)",
    "Authors: Morris Goldstein, Michael Mussa",
    "Published: December 1, 1993",
    "Series: IMF Working Papers",
    "Discusses the extent to which national capital markets have become linked and identifies several important consequences of increased integration.",
    "Reviews alternative approaches to the measurement of capital market integration, including:",
    "Examines two recent episodes of large-scale international capital flows for insights into global capital market workings:",
    "Capital market integration has multiple measurable dimensions; no single metric suffices. The paper emphasizes complementary measures:",
    "Case studies provide empirical and institutional lessons:",
    "Concluding analytical remarks address:",
    "Exchange rate management: integration increases the transmission of external shocks, implying greater exchange-rate policy considerations in an integrated capital market environment.",
    "Market-based discipline and regulation: larger, more influential financial markets require policy frameworks that acknowledge cross-border linkages and potential for rapid capital flow reversals.",
    "Investment financing for transition economies: as formerly centrally planned economies engage with global capital markets, policy attention to appropriate financing instruments and market development is necessary.",
    "No single policy prescription is offered; the paper sketches alternative approaches to managing the risks and opportunities from deeper international capital market integration."
  ],
  "alternates": {
    "markdown": "/en/publications/wp/issues/2016/12/30/the-integration-of-world-capital-markets-1161/index.md",
    "json": "/en/publications/wp/issues/2016/12/30/the-integration-of-world-capital-markets-1161/index.json",
    "bundleManifest": "/en/publications/wp/issues/2016/12/30/the-integration-of-world-capital-markets-1161/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-17T07:49:52.973Z"
}