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International Financial Integration and Economic Growth: New Evidence on Threshold Effects

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  • Jinzhao Chen

    (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

  • Thérèse Quang

    (EconomiX - CNRS : UMR7166 - Université Paris X - Paris Ouest Nanterre La Défense)

Abstract

Recent research highlights that countries differ with respect to their experience with capital flows and do not systematically gain from capital account liberalization. This paper is related to the empirical literature that investigates the particular conditions under which international financial integration (IFI) is growth-enhancing. Relying on non-linear panel techniques, we find that countries that are able to reap the benefits of IFI satisfy certain threshold conditions regarding the level of economic, institutional and financial development, and the inflation rate. Our results also reveal a differentiated behaviour of foreign direct investment and portfolio liabilities compared to debt liabilities.

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Paper provided by HAL in its series PSE Working Papers with number halshs-00710139.

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Date of creation: Jun 2012
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Handle: RePEc:hal:psewpa:halshs-00710139

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Keywords: International financial integration ; Economic growth ; Panel threshold regression model;

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Cited by:
  1. Madiha Bashir & Attiya Yasmin Javid, 2014. "Financial Flows, External Capital Structure, Institutions and Economic Growth in Asian Developing Economies," PIDE-Working Papers 2014:108, Pakistan Institute of Development Economics.
  2. Evans, Olaniyi, 2013. "International Financial Integration and The Nigerian Economic Performance: a Var Modeling Approach," MPRA Paper 52459, University Library of Munich, Germany.

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