Multi-Country Empirical Investigation into International Financial Integration

Mishra, Anil and Daly, Kevin (2006): Multi-Country Empirical Investigation into International Financial Integration. Published in: Journal of the Asia Pacific Economy , Vol. 11, No. 4 (November 2006): pp. 444-461.

Abstract

This paper focuses on the dynamics of international financial integration for a set of 13 industrial countries including Australia over the period 1990 to 2003 by analysing data on the level and composition of foreign assets and liabilities. The study provides insights into the broad trends on cross-country holdings and investigates the correlation of international asset positions with various ‘explanatory variables’ such as the degree of financial restrictions, the depth of financial markets, the openness to international trade, etc. The results show that the growth in goods trade and stock market capitalization are the main determinants of the growth in the scale of international balance sheets.

• Item Type: MPRA Paper
• Language: English
• Keywords: International financial integration, external assets and liabilities
• Subjects: F - International Economics > F3 - International Finance > F31 - Foreign Exchange; F - International Economics > F3 - International Finance > F32 - Current Account Adjustment ; Short-Term Capital Movements

References

Adam, Klaus, Japelli, Tullio, Menichini, Annamaria, Padula, Mario & Pagano, Marco (2002) Analyse,compare, and apply alternative indicators and monitoring methodologies to measure the evolution of capital market integration in the European Union. Unpublished; University of Salerno, Salerno, Italy.

Ahearne, Alan B., Griever, William & Warnock, Frank (2004) Information Costs and the Home Bias,Journal of International Economics, 62, pp. 313–336.

Beck, Thorsten, Levine, Ross & Loayza, Norman (2000) Finance and sources of growth, Journal of Financial Economics, 58(1-2), pp. 261–300.

Bekaert, Geert & Harvey, Campbell (2000) Foreign speculators and emerging equity markets, Journal of Finance, 55(2), pp. 565–613.

Bond, Marianne (1977)AModel of International Investment Income Flows, IMF Staff Papers, 23, pp. 344–379.

Claessens, Stijin, Klingebiel, Daniela&Schmukler, Sergio (2002) Explaining the migration of stocks from exchanges in emerging economies to international centres. CEPR Discussion Paper No. 3301, April.

Edison, Hali & Warnock, Frank (2003) A simple measure of the intensity of capital controls, Journal of Empirical Finance, 10(1-2), pp. 81–103.

Edison, Hali, Levine, Ross, Ricci, Luca A. & Slok, Torsten M. (2002) International financial integration and economic growth, Journal of International Money and Finance, 21(6), pp. 749–776.

Engel, Charles (2003) Comment on ‘International Financial Integration,’ IMF Staff Papers, 50, Special Issue.

Grossman, G. & Helpman, E. (1991) Innovation and Growth in the Global Economy (Cambridge, MA:MIT Press).

Henry, Peter Blair (2000) Stock market liberalization, economic reform, and emerging market equity prices, Journal of Finance, 55, pp. 529–564.

Hummels, David, Ishii, Joshi & Yi, Kei-Mu (2001) The nature and growth of vertical specialization in world trade, Journal of International Economics, 54, pp. 75–96.

International Monetary Fund (1993) Balance of Payments Manual, Vol. 5 (Washington, DC: International Monetary Fund).

International Monetary Fund (2000) International Financial Statistics, April (Washington, DC: International Monetary Fund).

International Monetary Fund (Various years) Balance of Payments Statistics (Washington, DC: International Monetary Fund).

Kalemli-Ozcan, Sebnem, Sorensen, Bent E. & Yosha, Oved (2001) Economic integration, industrial specialization and the asymmetry of macroeconomic fluctuations, Journal of International Economics,55, pp. 107–137.

Lane, Philip R. (2000) International investment positions: a cross sectional analysis, Journal of International Money and Finance, August 19, pp. 513–534.

Lane, Philip R. & Milesi-Ferretti, Gian Maria (2002) External wealth, the trade balance, and the real exchange rate, European Economic Review, 46, pp. 1049–1071.

Lane, Philip R. & Milesi-Ferretti, Gian Maria (2003) International financial integration, International Monetary Fund Staff Papers, 50(S), pp. 82–113.

Martin, Phillipe&Rey, Helene (2000) Financial integration and asset returns, European Economic Review, 44, pp. 1327–1350.

Martin, Phillipe&Rey, Helene (2001) Financial supermarkets: size matters for asset trade, NBERWorking Paper 8476 (September).

Pagano, Marco, Roell, Ailsa, Randl, Otto & Zechner, Josef (2001) What makes stock exchanges succeed? Evidence from cross listing decisions, European Economic Review, 45, pp. 770–782.

Pagano, Marco, Roell, Ailsa & Zechner, Josef (2002) The geography of equity listing: why do companies list abroad?, Journal of Finance, 57, pp. 2651–2694.

Portes, R.&H. Rey (2003) The Determinants of Cross Border Equity Flows: the Geography of Information (Mimeo: Princeton University).

Obstfeld, Maurice & Taylor, Alan M. (2002) Globalization and capital markets. NBERWorking Paper No.8846 (March).

O’Donnell, Barry (2002) International financial integration and economic performance. PhD Dissertation, Trinity College Dublin.

Rodrik, D. (1997) Has Globalization Gone Too Far? (Washington DC: Institute for International Economics).

Sorensen, Bent E. & Oved Yosha (1998) International Risk Sharing and European Monetary Unification,Journal of International Economics, 45, pp. 211–238.

Warnock, F. E. (2002) Home Bias and High Turnover Reconsidered, Journal of International Money and Finance, 21(6), pp. 795–805.

Yi, Kei-Mu (2003) Can vertical specialization explain the growth of world trade? Journal of Political Economy, 111, pp. 52–102.

Yildrium, Canan (2003), Information Assymetries, Corporate Governance Infrastructure and Foreign Portfolio Equity Investment, (Mimeo: Tilburg University)