The Impact of International Financial Integration on Industry Growth
AbstractThe empirical relationship between financial openness and growth is examined in this paper. In contrast to a large body of cross-country work investigating this link, I study the impact of financial integration on growth at the industry level. This paper provides evidence that financial openness has a positive effect on growth of industrial sectors, regardless of their characteristics. Moreover, industries that rely relatively more on external finance grow disproportionately faster in countries with more integrated financial systems. However, this industry-specific effect of financial openness decreases when I control for the development of the domestic financial system. Finally, the hypothesis that financial integration improved growth also by enhancing the functioning of the domestic financial system is tested. I find evidence of this indirect transmission channel of financial openness.
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Bibliographic InfoPaper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces0412.
Date of creation: Mar 2004
Date of revision:
Financial Integration; Financial Development; Growth;
Find related papers by JEL classification:
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
- F3 - International Economics - - International Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-12 (All new papers)
- NEP-FDG-2008-04-12 (Financial Development & Growth)
- NEP-OPM-2008-04-12 (Open Economy Macroeconomic)
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