Abstract
This paper presents empirical evidence suggesting that the volatility, trend-growth, and shock-duration of terms-of-trade (TOT) are important drivers of the degree and composition of international financial integration (IFI). Our results are based on a panel of 55 primary-commodity exporting countries during 1980-2007. The findings reveal that TOT trend-growth has larger impact on IFI compared to TOT volatility. Also, higher TOT volatility is robustly associated with greater cross-holdings of foreign assets and lower cross-holdings of foreign liabilities. Another notable finding is that longer duration of TOT shocks seems to shift IFI towards equity assets.
Original language | English |
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Pages (from-to) | 335-353 |
Number of pages | 19 |
Journal | Journal of International Financial Markets, Institutions and Money |
Volume | 33 |
DOIs | |
Publication status | Published - Dec 1 2014 |
Keywords
- Developing countries
- Financial globalization
- Foreign direct investment
- International investment positions
- Portfolio investment
- Terms-of-trade
ASJC Scopus subject areas
- Finance
- Economics and Econometrics