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Does Financial Integration Spur EconomicGrowth? New Evidence from the First Era of Financial Globalization

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  • Moritz Schularick
  • Thomas Steger

Abstract

Does international financial integration boost economic growth? The question has been discussed controversially for a long time. As of yet, robust evidence for a positive impact is lacking (Edison et al., 2002). However, there is substantial narrative evidence from economic history that highlights the contribution European capital made to economic growth ofperipheral economies before 1914. We have compiled the first comprehensive data set to test this hypothesis. The main finding is that there was indeed a significant and robust growth effect. Our theoretical explanation stresses property rights protection as a prerequisite for thestandard neoclassical model to work properly.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1691.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1691

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Keywords: international financial integration; economic growth; first era of globalization;

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Cited by:
  1. Corrado Di Maria & Simone Valente, 2006. "The Direction of Technical Change in Capital-Resource Economies," CER-ETH Economics working paper series, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich 06/50, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  2. Michael D. Bordo & Christopher M. Meissner, 2007. "Foreign Capital and Economic Growth in the First Era of Globalization," NBER Working Papers 13577, National Bureau of Economic Research, Inc.
  3. Bordo, Michael D., 2007. "Growing up to Financial Stability," Economics Discussion Papers, Kiel Institute for the World Economy 2007-33, Kiel Institute for the World Economy.
  4. Joscha Beckmann & Ansgar Belke & Michael Kühl, 2011. "Global Integration of Central and Eastern European Financial Markets—The Role of Economic Sentiments," Review of International Economics, Wiley Blackwell, Wiley Blackwell, vol. 19(1), pages 137-157, 02.
  5. Evans, Olaniyi, 2013. "International Financial Integration and The Nigerian Economic Performance: a Var Modeling Approach," MPRA Paper 52459, University Library of Munich, Germany.
  6. Valente, Simone, 2006. "Intergenerational Transfers, Lifetime Welfare and Resource Preservation," MPRA Paper 1042, University Library of Munich, Germany.
  7. Edward J. Balistreri & Russell H. Hillberry & Thomas F. Rutherford, 2008. "Structural Estimation and Solution of International Trade Models with Heterogeneous Firms," CER-ETH Economics working paper series, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich 08/89, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  8. Simone Valente, 2006. "Trade, Envy and Growth: International Status Seeking in a Two-Country World," CER-ETH Economics working paper series, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich 06/53, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  9. Katarzyna Sum, 2012. "The integration of the financial markets and growth evidence from a global cross-country analysis," Bank i Kredyt, National Bank of Poland, Economic Institute, National Bank of Poland, Economic Institute, vol. 43(3), pages 47-70.

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