The determinants of international financial integration

Vo, Xuan Vinh; Daly, Kevin

doi:10.1016/j.gfj.2006.04.007

Cited by 60 publications

(72 citation statements)

References 29 publications

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“…Tax policy could influence FDI inflows through several channels (see for e.g., Vo and Daly, 2007). First, corporations could shift their assets to countries with lower corporate income tax rates.…”

Section: Interaction Between Fdi and Government Public Revenuementioning

confidence: 99%

Does Trade Openness Contribute to Driving Financing Flows for Development?

Brun¹,

Gnangnon²

2017

WTO Working Papers

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Trade has been recognized in the 2030 development Agenda as well as in the Addis Ababa Agenda for Action as an important means for the implementation of the Sustainable Development Goals (SDGs). This paper questions whether trade openness could be an important driver of financing for development flows, notably development aid (ODA), Foreign Direct Investment (FDI) inflows, and government public revenue, the latter being the ultimate financing source for development for any country. The paper also takes advantage of the framework of analysis to investigate the interplay between these three types of financial flows. Relying on an unbalanced panel dataset comprising 125 countries, of which 37 are Least Developed Countries (LDCs), the empirical analysis uses the three stage least squares econometric approach and provides two important pieces of evidence: first, international trade openness is an important tool for driving financial flows for development, including government public revenue, development aid and FDI. As a result, it could contribute to mobilizing the substantial financial resources needed for development, including for the implementation of the SDGs. Second, there are strong interactions (complementarity and substitutability) between these three types of financing for development flows.

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Section: Interaction Between Fdi and Government Public Revenuementioning

confidence: 99%

Does Trade Openness Contribute to Driving Financing Flows for Development?

Brun¹,

Gnangnon²

2017

WTO Working Papers

View full text Add to dashboard Cite

show abstract

“…Although the way through which trade influences financial flows remains unclear (see Aviat and Coeurdacier, 2007, for a detailed analysis), the sign of the relationship is generally found to be positive. Some results suggest that trade in goods directly results in corresponding financial transactions such as, for instance, trade credit, transportation costs, or export insurance (Vo and Daly, 2007). Obstfeld and Rogoff (2000) indicate the gains to international financial diversification and the extent of goods trade are strongly related because of the wedge created by trade costs between marginal rates of substitution, curbing the gains to asset trade.…”

Section: On the Determinants Of International Financial Integrationmentioning

confidence: 99%

“…As indicated by Vo and Daly (2007), well developed financial markets may attract foreign investors seeking to diversify their portfolios. Some authors such as Henry (2000a,b) have corroborated these claims, finding that financial market development impacts strongly on investment and international financial integration.…”

Section: On the Determinants Of International Financial Integrationmentioning

confidence: 99%

“…Lemmen and Eijffinger (1996) have also found that inflation rates significantly explain international financial integration within the European Union. Some authors such as Vo and Daly (2007) argue that inflation might serve as a proxy for economic instability and therefore lead to a domestic currency depreciation which deterred foreign investors. However, the validity of this argument would be thwarted if high inflation countries were members of a currency union-which is the case for most countries in our sample.…”

Section: On the Determinants Of International Financial Integrationmentioning

confidence: 99%

“…Indeed, some authors consider this can only be an exploratory exercise "given the lack of firm theoretical priors and the sparse prior literature" (Lane and Milesi-Ferretti, 2003). Therefore, not only Lane and Milesi-Ferretti (2003) but also other studies such as Vo and Daly (2007), Lane and Milesi-Ferretti (2008) or Pérez et al (2005) generally consider linear models and use least squares for the estimations, with varying levels of complexity. These are parametric methods stipulating functional forms on the nature of the relationship between financial integration and its set of determinants.…”

Section: Parametric and Nonparametric Modelsmentioning

confidence: 99%

See 2 more Smart Citations

The Determinants of International Financial Integration Revisited: The Role of Networks and Geographic Neutrality

2008

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The efficacy of macroeconomic policies in resolving financial market disequilibria: A cross‐country analysis

2018

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This study attempts to evaluate the efficacy of macroeconomic policies in resolving financial market disequilibria and to elucidate the influence of the political landscape and global financial integration on the policymaking process. The current investigation examines three macroeconomic policies: (a) government spending, (b) liquidity provision, and (c) central bank interest rates by analysing 21 countries around the globe. The results suggest that government spending is a suboptimal macroeconomic policy for mitigating imbalances in financial markets, as it may have destabilizing effects. Liquidity provision was found to be ineffective in facilitating financial market stability whereas the adjustment of interest rates was found to be a viable tool for mitigating financial market imbalances. Therefore, an appropriate policy framework would comprise the following: prudent government spending, conditional liquidity provision, and a reduction in interest rates following the development of financial market disequilibria. Furthermore, this study found strong evidence against the notion that political orientations influence policy frameworks, which were designed to redress financial market disequilibria. This study also found that global financial integration does not influence the policymaking process.

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The determinants of international financial integration

Cited by 60 publications

References 29 publications

Does Trade Openness Contribute to Driving Financing Flows for Development?

Does Trade Openness Contribute to Driving Financing Flows for Development?

The Determinants of International Financial Integration Revisited: The Role of Networks and Geographic Neutrality

The efficacy of macroeconomic policies in resolving financial market disequilibria: A cross‐country analysis

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