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Multiple Equilibria in the Dynamics of Financial Globalization

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  • 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.

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Bibliographic Info

Paper provided by ESRC World Economy and Finance Research Programme, Birkbeck, University of London in its series WEF Working Papers with number 0044.

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Date of creation: Sep 2008
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Handle: RePEc:wef:wpaper:0044

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Keywords: financial globalization; multiple equilibria; threshold conditions; institutions;

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