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How complete are international fianncial markets?


  • Alexis Anagnostopoulos
  • Gregorios Siourounis


The aim of this paper is to develop an indirect test of international asset markets incompleteness. We show that when a country issues a full set of contingent claims, net foreign assets accumulation and growth rate of output are stationary, mean reverting processes. Examining a panel of 60 developed and developing countries and assessing stationarity with panel unit root tests reveals that net foreign assets accumulation is a non-stationary process whereas growth rate of output is a stationary process regardless of income or region stratum. We then show that this behavior is best accounted by a model of incomplete markets, where agents issue only one-period risk free assets.

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  • Alexis Anagnostopoulos & Gregorios Siourounis, 2009. "How complete are international fianncial markets?," Working Papers 00037, University of Peloponnese, Department of Economics.
  • Handle: RePEc:uop:wpaper:00037

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    complete vs. incomplete international financial markets; net foreign assets accumulation; output growth; panel unit root tests.;

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