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Multiple Equilibria in the Dynamics of Financial Globalization

Author

Listed:
  • Danny Cassimon

    (University of Antwerp)

  • Bjorn Van Campenhout

    (University of Antwerp)

Abstract

It is often argued that financial globalization involves threshold effects - countries should have a minimum level of preconditions in place before they can reap the benets of financial integration. We investigate what this means for the dynamics of de facto financial globalization, using recently developed threshold and sample splitting methods. We find that there are indeed signs of multiple equilibria in the dynamics of financial integration. We confirm that the main cause for these non-linearities is the quality of the institutional context, as measured by corruption, investment profile, capital account balance and aggregate growth prospects.

Suggested Citation

  • Danny Cassimon & Bjorn Van Campenhout, 2008. "Multiple Equilibria in the Dynamics of Financial Globalization," WEF Working Papers 0044, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
    • Handle: RePEc:wef:wpaper:0044
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    Keywords

    financial globalization; multiple equilibria; threshold conditions; institutions;
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