Welfare implications of international financial integration

Jong-Wha Lee and Kwanho Shin

Japan and the World Economy, 2012, vol. 24, issue 4, 235-245

Abstract: Focusing on technology spillover from foreign direct investment (FDI) inflows, this paper investigates the welfare implications of financial integration. Calibrations of a neoclassical growth model with international technology diffusion show that when technology catch-up due to FDI inflows is considered, the welfare gains from financial integration substantially increase, which contrasts with the small gains from additional, capital-accumulation effects of financial integration. The estimates suggest that by further enhancing financial integration, emerging Asian economies, such as the People's Republic of China (PRC) and the largest four Association of Southeast Asian Nations (ASEAN) countries, will experience substantial welfare gains.

Keywords: Foreign direct investment; Financial integration; Technology diffusion (search for similar items in EconPapers)
JEL-codes: F21 F36 O33 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (5)

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Working Paper: Welfare Implications of International Financial Integration (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:24:y:2012:i:4:p:235-245

DOI: 10.1016/j.japwor.2012.08.001

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