Financial Integration, Growth, and Volatility

Anne Epaulard () and Aude Pommeret

Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) from Université de Lausanne, Faculté des HEC, DEEP

Abstract: The aim of the paper is to evaluate the welfare gains from financial integration for developing and emerging economies. To do so, we build a stochastic endogenous growth model for a small open economy that can (i) borrow from the rest of the world, (ii) invest in foreign assets, and (iii) receive FDI. The model is calibrated on 32 emerging and developing economies for which we evaluate the upper bound for the welfare gain from financial integration. For plausible values of preference parameters and actual levels of financial integration, the mean welfare gain from financial integration is about 10 percent of the existing wealth. Compared to financial autarky, actual levels of financial integration translate into slightly higher annual growth rates (around 0.4 percentage points per year.)

Keywords: financial integration; risk-sharing; endogenous growth; stochastic growth (search for similar items in EconPapers)
JEL-codes: E13 F20 F36 F3 F43 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-fin and nep-mac
Date: 2004-12
View list of references

Downloads: (external link)
http://www.hec.unil.ch/deep/textes/04.18.pdf (application/pdf)

Related works:
Working Paper: Financial Integration, Growth, and Volatility (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Access Statistics for this paper

More papers in Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) from Université de Lausanne, Faculté des HEC, DEEP
Address: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Series data maintained by Claudine Delapierre Saudan ().