Abstract
According to theory, financial openness (FO) increases growth. The literature often conditions the growth effect of FO on favorable collateral environment. However, this can conceal the actual growth benefits of FO. This paper contributes to the literature by investigating the unconditional growth effect of FO, measured as de facto international financial integration (IFI). We maintain that the level of IFI might affect the structure of this relationship. We examine this important issue in advanced and emerging market and developing economies over the 990-209 period using conditional and unconditional growth regressions. Panel fixed effects threshold and dynamic panel threshold estimations suggest that the IFI-growth relation is conditional on data-driven estimated threshold level of IFI. Accordingly, IFI encourages (impedes) growth in less (more) financially integrated economies. The results show that it is not impossible to finance growth with IFI, but it might be risky, especially beyond a certain threshold level of IFI.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.