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Welfare implications of international financial integration

  • Lee, Jong-Wha
  • Shin, Kwanho

Focusing on technology spillover from foreign direct investment (FDI) inflows, this paper investigates the welfare implications of financial integration. Calibrations of a neoclassical growth model with international technology diffusion show that when technology catch-up due to FDI inflows is considered, the welfare gains from financial integration substantially increase, which contrasts with the small gains from additional, capital-accumulation effects of financial integration. The estimates suggest that by further enhancing financial integration, emerging Asian economies, such as the People's Republic of China (PRC) and the largest four Association of Southeast Asian Nations (ASEAN) countries, will experience substantial welfare gains.

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Article provided by Elsevier in its journal Japan and the World Economy.

Volume (Year): 24 (2012)
Issue (Month): 4 ()
Pages: 235-245

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Handle: RePEc:eee:japwor:v:24:y:2012:i:4:p:235-245
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505557

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