Thresholds In The Process Of International Financial Integration

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Executive Summary

The financial crisis has re-ignited the fierce debate about the merits of financial globalization and its implications for growth, especially for developing countries. The empirical literature has not been able to conclusively establish the presumed growth benefits of financial integration. Indeed, a new literature proposes that the indirect benefits of financial integration may be more important than the traditional financing channel emphasized in previous analyses. In this paper, the authors develop a unified empirical framework for characterizing such threshold conditions.

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