Title
Multiple equilibria in the dynamics of financial globalization : the role of institutions Multiple equilibria in the dynamics of financial globalization : the role of institutions
Author
Faculty/Department
Institute of Development Policy and Management
Publication type
article
Publication
Binghamton, N.Y. ,
Subject
Economics
Source (journal)
Journal of international financial markets, institutions and money. - Binghamton, N.Y.
Volume/pages
22(2012) :2 , p. 329-342
ISSN
1042-4431
ISI
000325897800006
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
Recent research underscores the dual role played by institutions for deciphering the financial globalization growth nexus. On the one hand, for capital account liberalization to be growth enhancing, a critical level of local institutional quality is needed. On the other hand, increased integration in the global financial system strengthens these countries institutions. We argue that this complex relationship may give rise to multiple equilibria in the dynamics of financial global integration: haphazard capital account liberalization may lead to situations where well integrated nations become increasingly better integrated, while poorly integrated nations are left at the margin. To test this hypothesis, we check whether controlling for the quality of institutions eliminates conditional convergence of global financial integration. Our results confirm that growth in financial integration is non-linear, and that this non-linearity disappears once we control for the quality of institutions.
E-info
https://repository.uantwerpen.be/docman/iruaauth/f23ff1/604cb36d40f.pdf
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