Financial Integration, Productivity and Capital Accumulation

Alessandra Bonfiglioli ()

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

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 investments. I provide empirical evidence from a sample of 93 countries observed between 1975 and 1999. The results suggest that financial integration has a positive direct effect on productivity, while it spurs capital accumulation only with some delay and indirectly, since capital follows the rise in productivity. I control for indirect effects of financial globalization through banking crises. Such episodes depress both investments and TFP, though they are triggered by financial integration only to a minor extent.

Keywords: Capital account liberalization; financial development; banking crises; growth; productivity; investments (search for similar items in EconPapers)
JEL-codes: G15 F43 O40 C23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-eff and nep-fdg
Date: 2007-02-02, Revised 2008-06-20
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Related works:
Working Paper: Financial Integration, Productivity and Capital Accumulation (2006)
Working Paper: Financial Integration, Productivity and Capital Accumulation (2007)
Journal Article: Financial integration, productivity and capital accumulation (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:aub:autbar:680.07

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