Benefits and Costs of International Financial Integration : Theory and Facts
The author provides a selective review of the recent analytical and empirical literature on the benefits and costs of international financial integration. He discusses the impact of financial openness on consumption, investment, and growth, and the...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2001/10/1620927/benefits-costs-international-financial-integration-theory-facts http://hdl.handle.net/10986/19503 |
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okr-10986-19503 |
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oai_dc |
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Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ADVERSE EFFECTS ADVERSE SELECTION ADVERSE SHOCKS ASYMMETRIC INFORMATION BANK RUNS BANKING SECTOR BANKING SYSTEM BONDS BORROWING BUDGET DEFICITS CAPITAL ACCOUNT CAPITAL ACCUMULATION CAPITAL FLIGHT CAPITAL FLOWS CAPITAL GOODS CAPITAL INFLOWS CAPITAL MARKETS CAPITAL OUTFLOWS CENTRAL BANK CERTIFICATES OF DEPOSIT COMMERCIAL BANKS COMPETITIVENESS CONTAGION CORPORATE CONTROL COST OF CAPITAL CREDIT RATIONING CURRENCY CRISES CURRENT ACCOUNT CYCLICAL BEHAVIOR DEBT DEPOSIT INSURANCE DEVELOPING COUNTRIES DISCOUNTED PRESENT VALUE DOMESTIC ECONOMY EASTERN CARIBBEAN CENTRAL BANK ECONOMIC CONSEQUENCES ECONOMIC ENVIRONMENT ECONOMIC GROWTH ECONOMIC POLICY ECONOMISTS ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL EVIDENCE EMPIRICAL RESEARCH EMPIRICAL STUDIES EMPLOYMENT EQUALIZATION EQUILIBRIUM EQUITY MARKETS EXCHANGE RATE REGIME EXCHANGE RATES EXPORTS EXTERNALITIES FACTOR MARKETS FINANCIAL CRISES FINANCIAL DISTURBANCES FINANCIAL INSTITUTIONS FINANCIAL INTEGRATION FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL OPENNESS FINANCIAL SECTOR FINANCIAL SERVICES FINANCIAL STABILITY FINANCIAL SYSTEM FINANCIAL SYSTEMS FINANCIAL TRANSACTIONS FINANCIAL VOLATILITY FOREIGN BANKS FOREIGN CAPITAL FLOWS GDP GLOBALIZATION GROWTH RATE HEDGE FUNDS HUMAN CAPITAL IMPORTS INCOME INCOME DISTRIBUTION INDIRECT EFFECTS INDUSTRIAL COUNTRIES INFLATION INFLATION TAX INTEREST RATE INTEREST RATES INTERNATIONAL FINANCIAL TRANSACTIONS INTERNATIONAL INVESTORS INTERNATIONAL RESERVES LABOR FORCE LEGAL FRAMEWORK LIQUIDITY LIVING STANDARDS LONG-RUN GROWTH LOW-INCOME COUNTRIES MACROECONOMIC ADJUSTMENT MACROECONOMIC EFFECTS MACROECONOMIC INSTABILITY MACROECONOMIC MANAGEMENT MACROECONOMIC POLICIES MACROECONOMIC STABILITY MARGINAL COST MARGINAL PRODUCTIVITY MARKET DISTORTIONS MERGERS MIDDLE-INCOME COUNTRIES MONETARY AUTHORITIES MORAL HAZARD MORAL HAZARD PROBLEMS NATURAL RESOURCES NET WORTH NONPERFORMING LOANS OIL OPEN ECONOMIES PENALTIES PERCEIVED RISK POLICY RESEARCH PORTFOLIO PORTFOLIO DIVERSIFICATION PORTFOLIOS POVERTY REDUCTION PRIVATE SECTOR PRODUCERS PRODUCTIVITY PUBLIC GOODS REAL EXCHANGE REAL EXCHANGE RATE RESOURCE ALLOCATION RETAINED EARNINGS RISK DIVERSIFICATION RISK MANAGEMENT RISK SHARING SAVINGS SHARP DETERIORATION SHORT-TERM DEBT SHORT-TERM INTEREST RATES SOCIAL COSTS STANDARD DEVIATION SUBSIDIARY SYSTEMIC BANKING CRISES TECHNOLOGICAL PROGRESS TERMS OF TRADE TERMS-OF-TRADE SHOCKS TOTAL FACTOR PRODUCTIVITY TRADE FLOWS TRANSITION ECONOMIES TRANSPARENCY UTILITY FUNCTION WELFARE GAINS |
| spellingShingle |
ADVERSE EFFECTS ADVERSE SELECTION ADVERSE SHOCKS ASYMMETRIC INFORMATION BANK RUNS BANKING SECTOR BANKING SYSTEM BONDS BORROWING BUDGET DEFICITS CAPITAL ACCOUNT CAPITAL ACCUMULATION CAPITAL FLIGHT CAPITAL FLOWS CAPITAL GOODS CAPITAL INFLOWS CAPITAL MARKETS CAPITAL OUTFLOWS CENTRAL BANK CERTIFICATES OF DEPOSIT COMMERCIAL BANKS COMPETITIVENESS CONTAGION CORPORATE CONTROL COST OF CAPITAL CREDIT RATIONING CURRENCY CRISES CURRENT ACCOUNT CYCLICAL BEHAVIOR DEBT DEPOSIT INSURANCE DEVELOPING COUNTRIES DISCOUNTED PRESENT VALUE DOMESTIC ECONOMY EASTERN CARIBBEAN CENTRAL BANK ECONOMIC CONSEQUENCES ECONOMIC ENVIRONMENT ECONOMIC GROWTH ECONOMIC POLICY ECONOMISTS ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL EVIDENCE EMPIRICAL RESEARCH EMPIRICAL STUDIES EMPLOYMENT EQUALIZATION EQUILIBRIUM EQUITY MARKETS EXCHANGE RATE REGIME EXCHANGE RATES EXPORTS EXTERNALITIES FACTOR MARKETS FINANCIAL CRISES FINANCIAL DISTURBANCES FINANCIAL INSTITUTIONS FINANCIAL INTEGRATION FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL OPENNESS FINANCIAL SECTOR FINANCIAL SERVICES FINANCIAL STABILITY FINANCIAL SYSTEM FINANCIAL SYSTEMS FINANCIAL TRANSACTIONS FINANCIAL VOLATILITY FOREIGN BANKS FOREIGN CAPITAL FLOWS GDP GLOBALIZATION GROWTH RATE HEDGE FUNDS HUMAN CAPITAL IMPORTS INCOME INCOME DISTRIBUTION INDIRECT EFFECTS INDUSTRIAL COUNTRIES INFLATION INFLATION TAX INTEREST RATE INTEREST RATES INTERNATIONAL FINANCIAL TRANSACTIONS INTERNATIONAL INVESTORS INTERNATIONAL RESERVES LABOR FORCE LEGAL FRAMEWORK LIQUIDITY LIVING STANDARDS LONG-RUN GROWTH LOW-INCOME COUNTRIES MACROECONOMIC ADJUSTMENT MACROECONOMIC EFFECTS MACROECONOMIC INSTABILITY MACROECONOMIC MANAGEMENT MACROECONOMIC POLICIES MACROECONOMIC STABILITY MARGINAL COST MARGINAL PRODUCTIVITY MARKET DISTORTIONS MERGERS MIDDLE-INCOME COUNTRIES MONETARY AUTHORITIES MORAL HAZARD MORAL HAZARD PROBLEMS NATURAL RESOURCES NET WORTH NONPERFORMING LOANS OIL OPEN ECONOMIES PENALTIES PERCEIVED RISK POLICY RESEARCH PORTFOLIO PORTFOLIO DIVERSIFICATION PORTFOLIOS POVERTY REDUCTION PRIVATE SECTOR PRODUCERS PRODUCTIVITY PUBLIC GOODS REAL EXCHANGE REAL EXCHANGE RATE RESOURCE ALLOCATION RETAINED EARNINGS RISK DIVERSIFICATION RISK MANAGEMENT RISK SHARING SAVINGS SHARP DETERIORATION SHORT-TERM DEBT SHORT-TERM INTEREST RATES SOCIAL COSTS STANDARD DEVIATION SUBSIDIARY SYSTEMIC BANKING CRISES TECHNOLOGICAL PROGRESS TERMS OF TRADE TERMS-OF-TRADE SHOCKS TOTAL FACTOR PRODUCTIVITY TRADE FLOWS TRANSITION ECONOMIES TRANSPARENCY UTILITY FUNCTION WELFARE GAINS Agenor, Pierre-Richard Benefits and Costs of International Financial Integration : Theory and Facts |
| relation |
Policy Research Working Paper;No. 2699 |
| description |
The author provides a selective review
of the recent analytical and empirical literature on the
benefits and costs of international financial integration.
He discusses the impact of financial openness on
consumption, investment, and growth, and the impact of
foreign bank entry on the domestic financial system.
Consistent with some recent studies, the author argues that
financial integration must be carefully prepared and managed
to ensure that the benefits outweigh the short-run risks.
Prudent macroeconomic management, adequate supervision and
prudential regulation of the financial system, greater
transparency, and improved capacity to manage risk in the
private sector are important requirements for coping with
potentially abrupt reversals in pro-cyclical, short-term
capital flows. The author adopts a more skeptical view than
some assessments in two areas, however. First, only foreign
direct investment appears to provide dynamic gains and
improved prospects for growth; the evidence on the benefits
of other types of capital flows remains weak. Second,
empirical research on the net benefits associated with
foreign bank penetration is far from conclusive; in
particular, the possibility that such penetration may lead
to adverse changes in the allocation of credit among
domestic firms cannot be dismissed on the basis of the
existing evidence. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Agenor, Pierre-Richard |
| author_facet |
Agenor, Pierre-Richard |
| author_sort |
Agenor, Pierre-Richard |
| title |
Benefits and Costs of International Financial Integration : Theory and Facts |
| title_short |
Benefits and Costs of International Financial Integration : Theory and Facts |
| title_full |
Benefits and Costs of International Financial Integration : Theory and Facts |
| title_fullStr |
Benefits and Costs of International Financial Integration : Theory and Facts |
| title_full_unstemmed |
Benefits and Costs of International Financial Integration : Theory and Facts |
| title_sort |
benefits and costs of international financial integration : theory and facts |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2001/10/1620927/benefits-costs-international-financial-integration-theory-facts http://hdl.handle.net/10986/19503 |
| _version_ |
1764439900715745280 |
| spelling |
okr-10986-195032021-04-23T14:03:43Z Benefits and Costs of International Financial Integration : Theory and Facts Agenor, Pierre-Richard ADVERSE EFFECTS ADVERSE SELECTION ADVERSE SHOCKS ASYMMETRIC INFORMATION BANK RUNS BANKING SECTOR BANKING SYSTEM BONDS BORROWING BUDGET DEFICITS CAPITAL ACCOUNT CAPITAL ACCUMULATION CAPITAL FLIGHT CAPITAL FLOWS CAPITAL GOODS CAPITAL INFLOWS CAPITAL MARKETS CAPITAL OUTFLOWS CENTRAL BANK CERTIFICATES OF DEPOSIT COMMERCIAL BANKS COMPETITIVENESS CONTAGION CORPORATE CONTROL COST OF CAPITAL CREDIT RATIONING CURRENCY CRISES CURRENT ACCOUNT CYCLICAL BEHAVIOR DEBT DEPOSIT INSURANCE DEVELOPING COUNTRIES DISCOUNTED PRESENT VALUE DOMESTIC ECONOMY EASTERN CARIBBEAN CENTRAL BANK ECONOMIC CONSEQUENCES ECONOMIC ENVIRONMENT ECONOMIC GROWTH ECONOMIC POLICY ECONOMISTS ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL EVIDENCE EMPIRICAL RESEARCH EMPIRICAL STUDIES EMPLOYMENT EQUALIZATION EQUILIBRIUM EQUITY MARKETS EXCHANGE RATE REGIME EXCHANGE RATES EXPORTS EXTERNALITIES FACTOR MARKETS FINANCIAL CRISES FINANCIAL DISTURBANCES FINANCIAL INSTITUTIONS FINANCIAL INTEGRATION FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL OPENNESS FINANCIAL SECTOR FINANCIAL SERVICES FINANCIAL STABILITY FINANCIAL SYSTEM FINANCIAL SYSTEMS FINANCIAL TRANSACTIONS FINANCIAL VOLATILITY FOREIGN BANKS FOREIGN CAPITAL FLOWS GDP GLOBALIZATION GROWTH RATE HEDGE FUNDS HUMAN CAPITAL IMPORTS INCOME INCOME DISTRIBUTION INDIRECT EFFECTS INDUSTRIAL COUNTRIES INFLATION INFLATION TAX INTEREST RATE INTEREST RATES INTERNATIONAL FINANCIAL TRANSACTIONS INTERNATIONAL INVESTORS INTERNATIONAL RESERVES LABOR FORCE LEGAL FRAMEWORK LIQUIDITY LIVING STANDARDS LONG-RUN GROWTH LOW-INCOME COUNTRIES MACROECONOMIC ADJUSTMENT MACROECONOMIC EFFECTS MACROECONOMIC INSTABILITY MACROECONOMIC MANAGEMENT MACROECONOMIC POLICIES MACROECONOMIC STABILITY MARGINAL COST MARGINAL PRODUCTIVITY MARKET DISTORTIONS MERGERS MIDDLE-INCOME COUNTRIES MONETARY AUTHORITIES MORAL HAZARD MORAL HAZARD PROBLEMS NATURAL RESOURCES NET WORTH NONPERFORMING LOANS OIL OPEN ECONOMIES PENALTIES PERCEIVED RISK POLICY RESEARCH PORTFOLIO PORTFOLIO DIVERSIFICATION PORTFOLIOS POVERTY REDUCTION PRIVATE SECTOR PRODUCERS PRODUCTIVITY PUBLIC GOODS REAL EXCHANGE REAL EXCHANGE RATE RESOURCE ALLOCATION RETAINED EARNINGS RISK DIVERSIFICATION RISK MANAGEMENT RISK SHARING SAVINGS SHARP DETERIORATION SHORT-TERM DEBT SHORT-TERM INTEREST RATES SOCIAL COSTS STANDARD DEVIATION SUBSIDIARY SYSTEMIC BANKING CRISES TECHNOLOGICAL PROGRESS TERMS OF TRADE TERMS-OF-TRADE SHOCKS TOTAL FACTOR PRODUCTIVITY TRADE FLOWS TRANSITION ECONOMIES TRANSPARENCY UTILITY FUNCTION WELFARE GAINS The author provides a selective review of the recent analytical and empirical literature on the benefits and costs of international financial integration. He discusses the impact of financial openness on consumption, investment, and growth, and the impact of foreign bank entry on the domestic financial system. Consistent with some recent studies, the author argues that financial integration must be carefully prepared and managed to ensure that the benefits outweigh the short-run risks. Prudent macroeconomic management, adequate supervision and prudential regulation of the financial system, greater transparency, and improved capacity to manage risk in the private sector are important requirements for coping with potentially abrupt reversals in pro-cyclical, short-term capital flows. The author adopts a more skeptical view than some assessments in two areas, however. First, only foreign direct investment appears to provide dynamic gains and improved prospects for growth; the evidence on the benefits of other types of capital flows remains weak. Second, empirical research on the net benefits associated with foreign bank penetration is far from conclusive; in particular, the possibility that such penetration may lead to adverse changes in the allocation of credit among domestic firms cannot be dismissed on the basis of the existing evidence. 2014-08-20T18:20:00Z 2014-08-20T18:20:00Z 2001-10 http://documents.worldbank.org/curated/en/2001/10/1620927/benefits-costs-international-financial-integration-theory-facts http://hdl.handle.net/10986/19503 English en_US Policy Research Working Paper;No. 2699 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |