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The Real Consequences of Financial Market Integration when Countries Are Heterogeneous

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  • Kerstin Gerling

    () (University of Mannheim, Department of Economics)

Abstract

This paper studies the mechanisms through which financial integration affects the pattern of international capital flows and the domestic economic performances when explicitly accounting for wealth inequality on imperfect capital markets. Balancing the impact of a firm size and a credit rationing effect on the net credit position and on aggregate production will help predicting the distribution of gains and losses among and within countries on the basis of a country’s aggregate wealth and its distribution. Altogether, the results contribute new explanations for some empirical puzzles. They also bear important implications for policy making, supranational treaty design and financial stability.

Suggested Citation

  • Kerstin Gerling, 2008. "The Real Consequences of Financial Market Integration when Countries Are Heterogeneous," Working Papers 141, Oesterreichische Nationalbank (Austrian Central Bank).
  • Handle: RePEc:onb:oenbwp:141
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    References listed on IDEAS

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    Keywords

    international financial integration; inequality; imperfect capital markets and allocative efficiency;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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