scholarly journals The effects of international financial integration on output and consumption volatilities in developing countries

2017 ◽  
Vol 72 (2) ◽  
pp. 445-466
Author(s):  
ERGÜL Özgür; GÖKSEL
Keyword(s):  
Developing Countries ◽  
Financial Integration ◽  
International Financial Integration

International Financial Integration and Stock Market in Developing Countries

2021 ◽  
Vol 6 (2) ◽  
pp. 148-159
Author(s):  
Fatma Zaarour ◽  
Adnene Ajimi
Keyword(s):  
Developing Countries ◽  
Stock Market ◽  
Cross Section ◽  
Capital Flows ◽  
Structural Breaks ◽  
Financial Integration ◽  
Negative Impact ◽  
Explanatory Power ◽  
Foreign Direct Investments ◽  
International Financial Integration

Objective - This study examines the relation between stock market capitalization and international financial integration for 23 developing countries during 1996 - 2018. Methodology/Technique - By using recently developed econometric panel techniques. The present paper takes into consideration cross section and structural breaks. Findings - Our findings show several interesting results. First, the existence of a long run relationship between the stock market and financial integration, particularly when private capital flows are included. Second, with the presence of structural breaks the result shows that international financial integration has a negative impact on stock market, which means that financial integration loses its explanatory power over the crisis period. Novelty - There is no applied study on the verification of the volatility of international capital flows (foreign direct investments and remittances) in the analysis of the relationship between international financial integration and stock markets. Type of Paper - Empirical Keywords: Cointegration, Cross-Section, International Financial Integration, Panel Unit Root, Structural Breaks, Stock Market. JEL Classification: C23, C51, C58, F02, F21, F24, G01.

Capital Flows to Developing Countries: Blessing or Curse? (Distinguished Lecture)

1998 ◽  
Vol 37 (4I) ◽  
pp. 125-151 ◽  
Author(s):  
Mohsin S. Khan
Keyword(s):  
Developing Countries ◽  
Capital Flows ◽  
Financial Integration ◽  
Foreign Capital ◽  
Foreign Debt ◽  
Capital Inflows ◽  
Private Capital ◽  
Policy Responses ◽  
Private Capital Flows ◽  
Significant Phenomenon

The surge of private capital flows to developing countries that occurred in the 1990s has been the most significant phenomenon of the decade for these countries. By the middle of the decade many developing countries in Asia and Latin America were awash with private foreign capital. In contrast to earlier periods when the scarcity of foreign capital dominated economic policy-making in these countries, the issue now for governments was how to manage the largescale capital inflows to generate higher rates ofinvestrnent and growth. While a number of developing countries were able to benefit substantially from the private foreign financing that globalisation made available to them, it also became apparent that capital inflows were not a complete blessing and could even turn out to be a curse. Indeed, in some countries capital inflows led to rapid monetary expansion, inflationary pressures, real exchange rate appreciation, fmancial sector difficulties, widening current account deficits, and a rapid build-up of foreign debt. In addition, as the experience of Mexico in 1994 and the Asian crisis of 1997-98 demonstrated, financial integration and globalisation can cut both ways. Private capital flows are volatile and eventually there can be a large reversal of capital because of changes in expected asset returns, investor herding behaviour, and contagion effects. Such reversals can lead to recessions and serious problems for financial systems. This paper examines the characteristics, causes and consequences of capital flows to developing countries in the 1990s. It also highlights the appropriate policy responses for governments facing such inflows, specifically to prevent overheating of the economy, and to limit the vulnerability to reversals of capital flows.

Financial Integrational Effects on Macroeconomic Instability in India

2017 ◽  
Vol 11 (2) ◽  
pp. 143-166
Author(s):  
Niranjan R.
Keyword(s):  
Financial Development ◽  
Financial Integration ◽  
Trade Openness ◽  
Jel Classification ◽  
Financial Openness ◽  
Vector Error Correction ◽  
Vector Error ◽  
International Financial Integration ◽  
Macroeconomic Instability ◽  
Negative Effect

The nexus between international financial integration and economic growth continues to be one of the most debated issues among macroeconomists, and these debates often raise several issues from the theoretical and policy perspectives. Financial integration can catalyse financial development, improve governance and impose discipline on macro-policies. However, in the absence of a basic pre-existing level of supporting conditions, financial integration can aggravate instability (Khadraoui, 2010). In addition, economic theory suggests that increased financial openness intensifies macroeconomic instability. This article investigates the financial integrational effects on macroeconomic instability in terms of output, consumption and investment volatility by employing the vector error correction model (VECM) with empirically reasonably parameters for an emerging economy, India, for the period 1989–2014. From the results, it is evident that financial openness has had a significant effect on output, consumption and investment volatility. Financial development has had a statistically significant negative effect on output, consumption and investment volatility. Similarly, trade openness and terms of trade significantly influence output, consumption and investment volatility. JEL Classification: F36, F41, F43, E32

scholarly journals Systemic Sudden Stops: The Relevance of Balance-Sheet Effects and Financial Integration

2016 ◽  
Author(s):  
Guillermo Calvo ◽  
Alejandro Izquierdo ◽  
Luis-Fernando Mejía
Keyword(s):  
Developing Countries ◽  
Critical Point ◽  
Foreign Exchange ◽  
Financial Integration ◽  
Balance Sheet ◽  
Banking System ◽  
Sudden Stop ◽  
Balance Sheet Effects ◽  
Tradable Goods ◽  
The Relationship

Using a sample of 110 developed and developing countries for the period 1990-2004, the chapter claims that a small supply of tradable goods relative to their domestic absorption, and large foreign-exchange denominated debts towards the domestic banking system, denoted Domestic Liability Dollarization, are key determinants of the probability of Systemic Sudden Stop (3S). Moreover, the larger is financial integration, the larger is likely to be the probability of 3S; however, beyond a critical point the relationship gets a sign reversion.

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