 Evaluating international financial integration in a center-periphery economyJournal of International Economics, 2015, vol. 95, issue 1, 129-144 Abstract: Does opening up capital markets facilitate risk diversification across borders? Are all countries gradually better off in the process of international financial integration? This paper explores welfare implications for various countries in a center-periphery framework with endogenous portfolio choice. Financial integration is divided into four stages: financial autarky, two-country integration, center-periphery integration and global integration. Two effects from financial integration emerge: diversification effects and financial terms of trade effects. Results show that financial integration between the center and a new periphery in center-periphery integration generates welfare losses for the peripheral country already integrated and welfare gains for the central country. Allowing for financial integration between peripheries in global integration leads the welfare in the center to deteriorate. From two-country integration directly to global integration, the large country gains, while the small one loses. Keywords: Financial integration; International risk sharing; Portfolio choice; Market size; Welfare analysis (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:95:y:2015:i:1:p:129-144 DOI: 10.1016/j.jinteco.2014.10.008 Access Statistics for this article Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés More articles in Journal of International Economics from Elsevier |
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