n Studies in Economics and Econometrics - Financial integration and economic growth : theory and a survey of evidence

Volume 37, Issue 3
  • ISSN : 0379-6205


Despite the growing studies on the effect of financial integration on economic growth, the lack of consensus among the studies calls for further research to enhance our understanding of the financial integration-growth nexus. This paper, instead of attempting another empirical investigation of the relationship between financial integration and economic growth, provides a review of the theoretical and the growing empirical literature. The aim of the theoretical review is to identify the potential benefits and costs of financial integration and to highlight the channels through which the effects are brought about. While the issues are explored in general, more emphasis is placed on developing countries. The empirical review helps to show the extent to which data corroborate the theoretical predictions. It further highlights the gaps in the existing studies on the effects of financial integration, which any new empirical investigation must carefully address to provide robust results.

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