The impact of international financial integration on economic growth: New evidence on threshold effects

Jinzhao Chen and Thérèse Quang

Economic Modelling, 2014, vol. 42, issue C, 475-489

Abstract: Recent research highlights that countries differ with respect to their experience with capital flows and do not systematically gain from capital account liberalization. This paper contributes to the empirical literature that investigates the circumstances under which international financial integration (IFI) is growth-enhancing. Relying on non-linear dynamic panel techniques, we find that countries that are able to reap the benefits of IFI satisfy certain threshold conditions regarding the level of economic, institutional and financial development, and government spending. Our results also reveal a differentiated behavior of FDI and portfolio equity liabilities compared to other types of capital flows, with threshold conditions being systematically less restricting for the former and growth effects significantly larger.

Keywords: International financial integration; Economic growth; Panel threshold regression model; Dynamic threshold panel (search for similar items in EconPapers)
JEL-codes: F3 F4 O4 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Related works:
Working Paper: The Impact of International Financial Integration on Economic Growth: New Evidence on Threshold Effects (2014)
Working Paper: International Financial Integration and Economic Growth: New Evidence on Threshold Effects (2012)
Working Paper: International Financial Integration and Economic Growth: New Evidence on Threshold Effects (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:42:y:2014:i:c:p:475-489

DOI: 10.1016/j.econmod.2014.06.011

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