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Does Financial Openness Promote Economic Integration?

Fabrizio Carmignani () and Abdur Chowdhury ()

No 2007_4, ECE Discussion Papers Series from UNECE

Abstract: The effect of financial openness on economic integration for two clusters of countries is estimated: the formerly planned economies of Eastern Europe and central Asia (emerging market economies) and some western advanced economies. We focus on two dimensions of economic integration: convergence of per-capita incomes across countries and trade integration. We employ both single equation estimation and system estimation to account for endogenous links between trade integration and income convergence. Results show that in the cluster of emerging market economies, financial openness is a powerful instrument of economic integration. In the group of advanced economies, financial openness effectively facilitates income convergence, but its impact on trade integration is ambiguous.

Keywords: financial openness; economic integration; transition economies; east Europe (search for similar items in EconPapers)
JEL-codes: F36 P33 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2007-06
New Economics Papers: this item is included in nep-int, nep-sea and nep-tra
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Published in UNECE Discussion Paper Series, No. 2007_4

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