Paper #988

Título:

Financial integration, productivity and capital accumulation

Autor:

Alessandra Bonfiglioli

Fecha:

Septiembre 2006

Resumen:

Understanding the mechanism through which financial globalization affect economic performance is crucial for evaluating the costs and benefits of opening financial markets. This paper is a first attempt at disentangling the effects of financial integration on the two main determinants of economic performance: productivity (TFP)and investments. I provide empirical evidence from a sample of 93 countries observed between 1975 and 1999. The results suggest that financial integration has a positive direct effect on productivity, while it spurs capital accumulation only with some delay and indirectly, since capital follows the rise in productivity. I control for indirect effects of financial globalization through banking crises. Such episodes depress both investments and TFP, though they are triggered by financial integration only to a minor extent. The paper also provides a discussion of a simple model on the effects of financial integration, and shows additional empirical evidence supporting it.

Palabras clave:

Capital account liberalization, financial development, banking crises, growth, productivity, investments

Códigos JEL:

G15, F43, O40, C23

Área de investigación:

Macroeconomía y Economía Internacional

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