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Financial Integration, Globalization, and Real Activity

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  • Gianni De Nicolò
  • Luciana Juvenal

Abstract

Using data for a large number of advanced and emerging market economies during 1982-2009, this paper examines the distinct impact of financial integration and globalization on several dimensions of real activity. We find that: (a) financial integration has progressed significantly worldwide, particularly in emerging markets, as well as within regions; (b) advances in financial integration predict better growth prospects; (c) both advances in financial integration and globalization are associated with higher growth, lower growth volatility, and lower probabilities of severe declines in real activity. Advances in financial integration and globalization indeed foster countries’ growth, and there appears to be no trade-off between these advances and macroeconomic stability.

Suggested Citation

  • Gianni De Nicolò & Luciana Juvenal, 2012. "Financial Integration, Globalization, and Real Activity," CESifo Working Paper Series 3737, CESifo.
  • Handle: RePEc:ces:ceswps:_3737
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    2. Joseph Ayoola Omojolaibi & Ekundayo Peter Mesagan & Nsofor Chinedu Stanley, 2016. "Globalization and Financial Development in Nigeria," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 20(4), pages 461-478, Autumn.
    3. Renée Fry-McKibbin & Cody Yu-Ling Hsiao & Vance L. Martin, 2018. "Measuring financial interdependence in asset returns with an application to euro zone equities," CAMA Working Papers 2018-05, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    4. De Nicolò, Gianni & Juvenal, Luciana, 2014. "Financial integration, globalization, and real activity," Journal of Financial Stability, Elsevier, vol. 10(C), pages 65-75.
    5. Fatma Tasdemir, 2023. "Financial Globalization and Growth: The Impacts of Financial Development and Governance," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 9(1), pages 99-111, June.
    6. Selvarajan, Sonia Kumari & Ab-Rahim, Rossazana, 2020. "Financial Integration and Economic Growth: Should Asia Emulate Europe?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 35(1), pages 191-213.
    7. Marcella Lucchetta & Michael Donadelli, 2012. "Emerging Stock Premia: Do Industries Matter?," Working Papers 2012_22, Department of Economics, University of Venice "Ca' Foscari".
    8. Ghosh, Amit, 2016. "How does banking sector globalization affect banking crisis?," Journal of Financial Stability, Elsevier, vol. 25(C), pages 70-82.
    9. Meng, Jingjing, 2016. "Asian emerging-market currencies in the international debt market (1994–2014)," Journal of Asian Economics, Elsevier, vol. 42(C), pages 20-32.
    10. Yu, Changhua, 2015. "Evaluating international financial integration in a center-periphery economy," Journal of International Economics, Elsevier, vol. 95(1), pages 129-144.
    11. Guglielmo Maria Caporale & Anamaria Diana Sova & Robert Sova, 2023. "Financial Integration and Economic Growth in Europe," CESifo Working Paper Series 10563, CESifo.
    12. Hugues Kouassi Kouadio & Landry Lewis Gakpa, 2021. "Financial Openness and Economic Growth in C?te d¡¯Ivoire: The Total Factor Productivity Channel," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 12(2), pages 138-149, April.
    13. Eslamloueyan, Karim & Fatemifar, Neda, 2021. "Does deeper financial integration lead to macroeconomic and financial instability in Asia?," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 437-451.
    14. Ekpo Akpan & Chuku Chuku, 2017. "Working Paper 291 - Regional Financial Integration and Economic Activity in Africa," Working Paper Series 2403, African Development Bank.
    15. Claudius Gräbner & Philipp Heimberger & Jakob Kapeller & Florian Springholz, 2021. "Understanding economic openness: a review of existing measures," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(1), pages 87-120, February.
    16. Chris Garbers & Guangling Liu, 2017. "Flow specific capital controls for emerging markets," Working Papers 12/2017, Stellenbosch University, Department of Economics.
    17. Fang, Libing & Chen, Baizhu & Yu, Honghai & Qian, Yichuo, 2018. "Identifying systemic important markets from a global perspective: Using the ADCC ΔCoVaR approach with skewed-t distribution," Finance Research Letters, Elsevier, vol. 24(C), pages 137-144.
    18. Yfanti, Stavroula & Karanasos, Menelaos & Zopounidis, Constantin & Christopoulos, Apostolos, 2023. "Corporate credit risk counter-cyclical interdependence: A systematic analysis of cross-border and cross-sector correlation dynamics," European Journal of Operational Research, Elsevier, vol. 304(2), pages 813-831.
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    20. Allen, Linda & Tang, Yi, 2016. "What’s the contingency? A proposal for bank contingent capital triggered by systemic risk," Journal of Financial Stability, Elsevier, vol. 26(C), pages 1-14.
    21. John Bosco Nnyanzi & Susan Kavuma & John Sseruyange & Aisha Nanyiti, 2022. "The manufacturing output effects of infrastructure development, liberalization and governance: evidence from Sub-Saharan Africa," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(2), pages 369-400, June.
    22. Silva, Walmir & Kimura, Herbert & Sobreiro, Vinicius Amorim, 2017. "An analysis of the literature on systemic financial risk: A survey," Journal of Financial Stability, Elsevier, vol. 28(C), pages 91-114.
    23. Ongo Nkoa Bruno Emmanuel & Song Jacques Simon & Balla Mekongo Célestin Ghislain, 2021. "Inequalities in Africa : Does financial integration matter?," Economics Bulletin, AccessEcon, vol. 41(3), pages 1983-1993.

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    More about this item

    Keywords

    financial integration; globalization; real activity;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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