Economics, Econometrics and Finance
4 years ago

Financial sector development determines success of cross-border capital flows integration.

RePEc: Research Papers in Economics
Does Financial Sector Development Augment Cross Border Capital Flows
Abhijit Sen Gupta, Pragya Atri

Paper Summary

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The level of development in a country's financial sector affects how much money flows in and out of the country. When a country has advanced financial tools and connects well with global markets, it's easier to bypass rules on moving money. Research shows that only when a country's financial sector is highly developed does it become more connected to global capital flows. Below a certain level of financial development, the country's connection to global markets actually decreases.