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Does Financial Openness Lead To Deeper Domestic Financial Markets? / Calderon, Cesar
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Calderón, César.
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Access to Finance.
- Bank assets.
- Banking system.
- Banks and Banking Reform.
- Bond market.
- Bond market development.
- Currencies and Exchange Rates.
- Debt Markets.
- Domestic financial markets.
- Economic Theory and Research.
- Emerging market.
- Emerging market economies.
- Emerging Markets.
- Finance and Financial Sector Development.
- Financial development.
- Financial market.
- Financial openness.
- Globalization.
- International capital.
- International capital markets.
- Investment.
- Investor.
- Macroeconomics and Economic Growth.
- Market development.
- Private bond.
- Private credit.
- Private Sector Development.
- Stock.
- Stock market.
- Local Subjects:
- Access to Finance.
- Bank assets.
- Banking system.
- Banks and Banking Reform.
- Bond market.
- Bond market development.
- Currencies and Exchange Rates.
- Debt Markets.
- Domestic financial markets.
- Economic Theory and Research.
- Emerging market.
- Emerging market economies.
- Emerging Markets.
- Finance and Financial Sector Development.
- Financial development.
- Financial market.
- Financial openness.
- Globalization.
- International capital.
- International capital markets.
- Investment.
- Investor.
- Macroeconomics and Economic Growth.
- Market development.
- Private bond.
- Private credit.
- Private Sector Development.
- Stock.
- Stock market.
- Physical Description:
- 1 online resource (57 pages)
- Place of Publication:
- Washington, D.C., The World Bank, 2009
- System Details:
- data file
- Summary:
- Advanced and emerging market economies have rapidly integrated into international capital markets and this growing globalization of financial markets has led to some important changes in the patterns of saving and investment across the world. The main goal of this paper is to test whether the cross-border asset trade has led to improvements in the intermediation of these savings - that is, foster development of domestic financial markets. The authors have collected annual information on financial market development, financial openness, and other control variables for a sample of 145 countries for the period 1974-2007. Controlling for the likely endogeneity of financial openness, the analysis finds that rising financial openness expands private credit, bank assets, and stock market and private bond market development, and generates efficiency gains in the banking system. However, the impact of financial openness on domestic financial development may depend on the level of institutional quality, the extent of investor protection, and the degree of trade openness. In general, rising financial openness will enlarge the size and activity of financial intermediaries, improve efficiency in the banking system, and contribute to deepen private bond markets in countries with moderate to high levels of institutional quality and investor protection as well as in countries with high trade openness.
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