WHAT DRIVES INDIA’S FINANCIAL INTEGRATION?

Rakesh Padhan and K.P. Prabheesh ()
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Rakesh Padhan: Indian Institute of Technology Roorkee
K.P. Prabheesh: Indian Institute of Technology Hyderabad

Bulletin of Monetary Economics and Banking, 2023, vol. 26, issue Special Issue, 77-96

Abstract: We explore the determinants of Financial Integration (FI) in the Indian context from 1996Q2-2018Q4. Using a newly constructed quarterly financial integration index based on the stock of external assets and liabilities position and a range of econometric methodologies, we find that a structural factor (trade openness) and an institutional factor (institutional quality) drive financial integration in India. Our findings also show the importance of exchange rate volatility, global growth rate, and global interest rate in determining India’s financial integration. These findings have crucial implications in designing the policy framework for achieving higher financial integration in India.

Keywords: Financial integration; Determinants; Trade openness; Institutional quality; ARDL. (search for similar items in EconPapers)
JEL-codes: F10 F21 F32 F62 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:26:y:2023:i:spf:p:77-96

DOI: 10.59091/1410-8046.2057

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