Financial Integration, Growth and Volatility
Epaulard, Anne; Pommeret, Aude (2016), Financial Integration, Growth and Volatility, Pacific Economic Review, 21, 3, p. 330-357. 10.1111/1468-0106.12177
TypeArticle accepté pour publication ou publié
External document linkhttps://doi.org/10.1111/1468-0106.12177
Journal namePacific Economic Review
MetadataShow full item record
Laboratoire d'Economie de Dauphine [LEDa]
Institut de Recherche en Gestion et en Economie [IREGE]
Abstract (EN)The aim of this paper is to evaluate the welfare gains from financial integration for developing and emerging market economies. To do so, we build a stochastic endogenous growth model for a small open economy that can: (i) borrow from the rest of the world; (ii) invest in foreign assets; and (iii) receive foreign direct investment. The model is calibrated on 46 emerging market and developing economies for which we evaluate the upper bound for the welfare gain from financial integration. For plausible values of preference parameters and actual levels of financial integration, the mean welfare gain from financial integration is around 13.5% of initial wealth. Compared with financial autarcy, actual levels of financial integration translate into higher annual growth rates.
Subjects / KeywordsEndogenous Growth; Risk-sharing; Stochastic Growth; Financial Integration; small open economy; growth model; developing economies
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