Financial Integration and Risk-Adjusted Growth Opportunities

By Iryna V. Ivaschenko, Gianni De Nicolo

May 1, 2008

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Format: Chicago

Iryna V. Ivaschenko, and Gianni De Nicolo. Financial Integration and Risk-Adjusted Growth Opportunities, (USA: International Monetary Fund, 2008) accessed December 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper documents the evolution of measures of financial integration for major advanced and emerging markets economies, assesses whether advances in integration have had a significant positive impact on countries' risk-adjusted growth opportunities, and identifies some of the channels through which financial integration may foster growth. Three main results obtain. First, financial integration has progressed significantly worldwide, particularly in emerging markets, and regional integration has advanced at the fastest pace in Europe. Second, a country's speed of integration predicts future country's risk-adjusted growth opportunities, while improved risk-adjusted growth opportunities predict future advances in integration, indicating that the countries whose integration has been faster may have benefited most from a virtuous dynamics in which financial integration and improved real prospects are mutually reinforcing. Third, financial integration predicts globalization but the reverse does not necessarily hold, while advances in financial integration predict advances in financial development and improvements in the liquidity of equity markets.

Subject: Emerging and frontier financial markets, Financial integration, Financial sector development, Stock markets, Stocks

Keywords: Cost of capital, WP

Publication Details

Pages:

24
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2008/126
Stock No:

WPIEA2008126
ISBN:

9781451869866
ISSN:

1018-5941

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