Abstract
The interaction of financial openness and economic growth
Highlights
In the period 1980–2000, a number of factors contributed to the increase in the level of financial openness of world economies
Determining the relationship between financial openness and the development of small commodity based economies with underdeveloped institutional environment of the financial sector allows us to identify the main contradictions of the impact of financial openness, which are obvious counterproductive effects due to the accumulation of systemic risk factors, including volatility and financial market concentration, extensive foreign currency predominance, the deployment of credit booms and capital flight, with limited productive effects in the form of expansion and reduction of financial and resource base, diversification of liquidity risk of the banking system, and investment support for catching up economic development
The decisive role is played by the momentum of macroeconomic dynamics, which is a factor in the inflow of capital in relation to the spread of return on capital, regulatory financial openness and the level of institutional development
Summary
The article summarizes current approaches to the theoretical substantiation of the effects of financial openness on emerging economies. The lack of direct dependence of international capital flows on the spread of capital yields and the level of financial openness leads to the conclusion that, in addition to the classical factors, the drivers of foreign capital inflow include positive economic dynamics of the recipient country and presence of high-yield markets. The presence of a developed financial sector reduces the risks of instability and increases the investment component of financial openness. These conditions form an inverse relationship between macroeconomic dynamics, the level of development of the institutional environment and the change in the level of real financial openness of the economy
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