Financial integration, productivity and capital accumulationJournal of International Economics, 2008, vol. 76, issue 2, pages 337-355 Abstract: Understanding the mechanism through which financial globalization affects economic performance is crucial for evaluating the costs and benefits of opening financial markets. This paper is a first attempt at disentangling the effects of financial integration on the two main determinants of economic performance: productivity (TFP) and investment. I provide empirical evidence from a sample of 70 countries observed between 1975 and 1999. The results for both de jure and de facto indicators suggest that financial integration has a positive direct effect on productivity, while it does not directly affect capital accumulation. I also control for indirect effects of financial globalization through financial development and banking and currency crises. While financial integration does not systematically increase domestic financial depth, it may raise the likelihood of banking crises, though only to a minor extent. Yet, the overall effect of financial liberalization remains positive for productivity and negligible for investment. Keywords: Capital; account; liberalization; Financial; development; Financial; crises; Growth; Productivity; Investment (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: http://EconPapers.repec.org/RePEc:eee:inecon:v:76:y:2008:i:2:p:337-355 Access Statistics for this article Journal of International Economics is edited by J. Eaton and C. M. Engel More articles in Journal of International Economics from Elsevier |
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