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        Does Financial Integration Matter for Financial Development? Evidence from the East Asian and Pacific Region

        Farhad Taghizadeh-Hesary,Nguyet Thi Minh Phi,Hanh Hoang Thi Hong,Vu Tuan Chu 세종대학교 경제통합연구소 2019 Journal of Economic Integration Vol.34 No.4

        This paper assesses the impact of financial integration on financial development and establishes thresholds for materializing gains of financial advances from financial globalization using a sample of 34 countries from the East Asian and Pacific region. Following the approaches of Kose et al. (2011) and Asongu and De Moor (2016), we test non-linearity within the financial openness and financial development nexus through semi-parametric ordinary least-squares regression, and then, we develop threshold dynamics models. According to our findings, the effect of financial integration on financial development significantly changes across different financial inflows. When using external debt as a proxy for financial openness, there exists a robust significant inverted U-shaped relationship between financial integration and financial development. The empirical findings also suggest that the financial integration-development nexus is contingent on the level of trade openness, national income, and institutional quality. The results are robust to different measures of financial development and integration, the inclusion of other determinants of financial development, and considerations of endogeneity.

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