IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

The integration of imperfect financial markets: Implications for business cycle volatility

  • Buch, Claudia M.
  • Pierdzioch, Christian

During the last two decades, the degree of openness of national financial systems has increased substantially. At the same time, asymmetries in information and other financial market frictions have remain prevalent. We study both empirically and theoretically the implications of the opening up of national financial systems in the presence of financial market frictions for business cycle volatility. In our empirical analysis, we demonstrate that stylised facts suggest that countries with more developed financial systems have lower business cycle volatility. Financial openness has no strong impact on business cycle volatility, in contrast. In our theoretical analysis, we use a dynamic general equilibrium model to study the implications of the opening up of national financial markets and of financial market frictions for business cycle volatility. We find that the implications of opening up national financial markets for business cycle volatility are largely unaffected by the presence of financial market frictions.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/B6V82-4GTWRTP-1/2/2a319e698f53160ff4a1367ed70f49c3
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 27 (2005)
Issue (Month): 7 (October)
Pages: 789-804

as
in new window

Handle: RePEc:eee:jpolmo:v:27:y:2005:i:7:p:789-804
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505735

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Miller, Merton, 1998. "Asian financial crisis," Japan and the World Economy, Elsevier, vol. 10(3), pages 355-358, July.
  2. Maurice Obstfeld & Kenneth Rogoff, 1994. "Exchange Rate Dynamics Redux," NBER Working Papers 4693, National Bureau of Economic Research, Inc.
  3. Robert Townsend, 1979. "Optimal contracts and competitive markets with costly state verification," Staff Report 45, Federal Reserve Bank of Minneapolis.
  4. Gali, Jordi & Gertler, Mark & Lopez-Salido, J. David, 2001. "European inflation dynamics," European Economic Review, Elsevier, vol. 45(7), pages 1237-1270.
  5. Clarida, Richard & Gali, Jordi & Gertler, Mark, 1998. "Monetary policy rules in practice Some international evidence," European Economic Review, Elsevier, vol. 42(6), pages 1033-1067, June.
  6. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  7. Jappelli, Tullio & Pagano, Marco, 2008. "Financial Market Integration Under EMU," CEPR Discussion Papers 7091, C.E.P.R. Discussion Papers.
  8. Faia, Ester, 2002. "Monetary policy in a world with different financial systems," Working Paper Series 0183, European Central Bank.
  9. Centeno, Mario & Mello, Antonio S., 1999. "How integrated are the money market and the bank loans market within the European Union?," Journal of International Money and Finance, Elsevier, vol. 18(1), pages 75-106, January.
  10. Fratzscher, M., 2001. "Financial Market Integration in Europe: On the Effects of EMU on Stock Markets," Papers 48, Quebec a Montreal - Recherche en gestion.
  11. Patrick Bolton & Marco Becht & Alisa Röell, 2002. "Corporate Governance and Control," NBER Working Papers 9371, National Bureau of Economic Research, Inc.
  12. Lieven Baele & Annalisa Ferrando & Peter Hördahl & Elizaveta Krylova & Cyril Monnet, 2004. "Measuring financial integration in the euro area," Occasional Paper Series 14, European Central Bank.
  13. Bernanke, B. & Gertler, M. & Gilchrist, S., 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," Working Papers 98-03, C.V. Starr Center for Applied Economics, New York University.
  14. Marvin Goodfriend, 1990. "Interest rates and the conduct of monetary policy," Working Paper 90-06, Federal Reserve Bank of Richmond.
  15. McCallum, Bennett T., 1998. "Solutions to linear rational expectations models: a compact exposition," Economics Letters, Elsevier, vol. 61(2), pages 143-147, November.
  16. Bennett T McCallum & Edward Nelson, 2001. "Monetary Policy for an Open Economy: An Alternative Framework with Optimising Agents and Sticky Prices," Discussion Papers 05, Monetary Policy Committee Unit, Bank of England.
  17. Rajan, Raghuram G & Zingales, Luigi, 2001. "The Great Reversals: The Politics of Financial Development in the 20th Century," CEPR Discussion Papers 2783, C.E.P.R. Discussion Papers.
  18. Bernanke, Ben S & Blinder, Alan S, 1988. "Credit, Money, and Aggregate Demand," American Economic Review, American Economic Association, vol. 78(2), pages 435-39, May.
  19. Claudia M. Buch & Christian Pierdzioch, 2003. "The Integration of Imperfect Financial Markets: Implications for Business Cycle Volatility," Kiel Working Papers 1161, Kiel Institute for the World Economy.
  20. Faia, Ester, 2001. "Stabilization policy in a two country model and the role of financial frictions," Working Paper Series 0056, European Central Bank.
  21. Philippe Aghion & Philippe Bacchetta & Abhijit Banerjee, 2000. "Capital Markets and the Instability of Open Economies," Working Papers 99.01 update, Swiss National Bank, Study Center Gerzensee.
  22. Senay, Ozge, 1998. "The Effects of Goods and Financial Market Integration on Macroeconomic Volatility," The Manchester School of Economic & Social Studies, University of Manchester, vol. 66(0), pages 39-61, Supplemen.
  23. Kleimeier, Stefanie & Sander, Harald, 2000. "Regionalisation versus globalisation in European financial market integration: Evidence from co-integration analyses," Journal of Banking & Finance, Elsevier, vol. 24(6), pages 1005-1043, June.
  24. Klein, Paul, 2000. "Using the generalized Schur form to solve a multivariate linear rational expectations model," Journal of Economic Dynamics and Control, Elsevier, vol. 24(10), pages 1405-1423, September.
  25. Jordi Gali & Tommaso Monacelli, 2002. "Monetary Policy and Exchange Rate Volatility in a Small Open Economy," NBER Working Papers 8905, National Bureau of Economic Research, Inc.
  26. Mariassunta Giannetti & Luigi Guiso & Tullio Jappelli & Mario Padula & Marco Pagano, 2002. "Financial Market Integration, Corporate Financing and Economic Growth," European Economy - Economic Papers 179, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  27. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
  28. Sutherland, Alan, 1996. " Financial Market Integration and Macroeconomic Volatility," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(4), pages 521-39, December.
  29. Marco Terrones & Eswar Prasad & M. Ayhan Kose, 2003. "Financial Integration and Macroeconomic Volatility," IMF Working Papers 03/50, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:jpolmo:v:27:y:2005:i:7:p:789-804. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.