Financial Openness And Thresholds Revisited: Accounting For Model Uncertainty
Source: University of Munich
Recent research stresses the importance of supportive initial conditions for countries to reap the benefits of financial integration. This paper revisits the robustness and relative importance of different thresholds in the link between financial openness and growth. It offers a comprehensive analysis of threshold effects in a common empirical framework. The authors employ Bayesian Model Averaging (BMA) techniques to appropriately account for the problem of model uncertainty in cross-country growth regressions which has been previously neglected by the financial openness literature.