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Financial integration and risk-adjusted growth opportunities: a global perspective

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  • Gianni De Nicolò
  • Luciana Juvenal

Abstract

This paper documents the dynamics of financial integration for major advanced and emerging markets economies during the 1994-2009 period, assesses whether advances in integration have had a significant direct positive impact on countries' growth opportunities, and identifies some of the channels through which financial integration may indirectly foster growth. Three main results are obtained. First, financial integration has progressed significantly worldwide and has been fastest in emerging markets. Second, a country's speed of integration predicts its future risk-adjusted growth opportunities, while improved riskadjusted growth opportunities may predict future advances in integration, but not in all cases, suggesting a causal relationship from financial integration to improved real prospects. Third, advances in financial integration foster increased financial openness, financial development, and the liquidity of equity markets, but the reverse does not necessarily hold. Policies aimed at fostering financial integration may be necessary, albeit not sufficient, to allow countries to reap its benefits.

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2010-012.

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Date of creation: 2010
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Handle: RePEc:fip:fedlwp:2010-012

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Keywords: International finance ; Financial risk management;

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References

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Cited by:
  1. Christian Friedrich & Isabel Schnabel & Jeromin Zettelmeyer, 2010. "Financial integration and growth - Is emerging Europe different?," Working Papers 123, European Bank for Reconstruction and Development, Office of the Chief Economist.
  2. Friedrich, Christian & Schnabel, Isabel & Zettelmeyer, Jeromin, 2013. "Financial integration and growth — Why is Emerging Europe different?," Journal of International Economics, Elsevier, vol. 89(2), pages 522-538.

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