The Impact of International Financial Integration on Economic Growth: New Evidence on Threshold Effects

Jinzhao Chen and Thérèse Quang

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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 behaviour 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.

Date: 2014
Note: View the original document on HAL open archive server: https://hal.science/hal-03737730
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Published in Economic Modelling, 2014, ⟨10.1016/j.econmod.2014.06.011⟩

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Journal Article: The impact of international financial integration on economic growth: New evidence on threshold effects (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03737730

DOI: 10.1016/j.econmod.2014.06.011

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