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International Financial Integration and Economic Growth: New Evidence on Threshold Effects

  • Jinzhao Chen

    (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - École des Ponts ParisTech (ENPC) - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)

  • Thérèse Quang

    (EconomiX - CNRS - Centre National de la Recherche Scientifique - UP10 - Université Paris 10, Paris Ouest Nanterre La Défense)

Recent research highlights that countries differ with respect to their experience with capital flows and do not systematically gain from capital account liberalization. This paper is related to the empirical literature that investigates the particular conditions under which international financial integration (IFI) is growth-enhancing. Relying on non-linear panel techniques, we find that countries that are able to reap the benefits of IFI satisfy certain threshold conditions regarding the level of economic, institutional and financial development, and the inflation rate. Our results also reveal a differentiated behaviour of foreign direct investment and portfolio liabilities compared to debt liabilities.

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Handle: RePEc:hal:psewpa:halshs-00710139
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