How does terms-of-trade behavior shape international financial integration in primary-commodity exporting economies?

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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 languageEnglish
Pages (from-to)335-353
Number of pages19
JournalJournal of International Financial Markets, Institutions and Money
Publication statusPublished - Dec 1 2014



  • Developing countries
  • Financial globalization
  • Foreign direct investment
  • International investment positions
  • Portfolio investment
  • Terms-of-trade

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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