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Welfare Implications of International Financial Integration

Author

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  • Lee, Jong-Wha

    () (Asian Development Bank)

  • Shin, Kwanho

    () (Department of Economics, Korea University)

Abstract

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.

Suggested Citation

  • Lee, Jong-Wha & Shin, Kwanho, 2008. "Welfare Implications of International Financial Integration," Working Papers on Regional Economic Integration 20, Asian Development Bank.
  • Handle: RePEc:ris:adbrei:0020
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    References listed on IDEAS

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    Cited by:

    1. Hossein Askari & Abbas Mirakhor, 2014. "Risk sharing, public policy and the contribution of Islamic finance," PSL Quarterly Review, Economia civile, vol. 67(271), pages 345-379.
    2. Schou-Zibell, Lotte & Madhur, Srinivasa, 2010. "Regulatory Reforms for Improving the Business Environment in Selected Asian Economies - How Monitoring and Comparative Benchmarking Can Provide Incentive for Reform," Working Papers on Regional Economic Integration 40, Asian Development Bank.
    3. Mihaela ȘTEȚ, 2013. "Financial Implications Of Technological Progress," SEA - Practical Application of Science, Fundația Română pentru Inteligența Afacerii, Editorial Department, issue 1, pages 192-199, June.

    More about this item

    Keywords

    Foreign direct investment; financial integration; technology diffusion;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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