absorptive capacity and the effects of foreign direct investment and equity foreign portfolio investment on economic growth abstract this study examines the effects of foreign direct investment fdi and equity foreign portfolio investment efpi on economic growth using data on 80 countries from 1979 through 1998 the results largely suggest that lagged fdi and efpi do not have direct unmitigated positive effects on growth but some data are consistent with the view that the effects of fdi and efpi are contingent on the absorptive capacity of host countries with particular respect to financial or institutional development moreover extreme bound analysis eba of significant results indicates that the estimates are robust compared to other empirical studies on growth

firms markets and the state institutional change and manufacturing sector profitability variances in india we assess absolute magnitudes relative importance and intertemporal differences in firm industry and business group effects in explaining the variance of indian manufacturing firms profitability over the 26 year period between 1980 1981 and 2005 2006 we stratify the data by institutional phases to place emphasis on the role of changing institutional factors in an emerging economy first as a regime of command and control transits to partial liberalization between 1985 and 1991 and then to an open competitive market economy after 1991 thereafter financial reforms occur followed by legal reforms we find that liberalization significantly affects and alters the relative importance of firm industry and group effects firm effects are always important whether in a command and control regime with benefits accruing from protectionism and political rent seeking or in liberalized periods where firm specific capabilities and dynamic efficiencies are valued industry effects are significant in the command and control regime when mandatory sector placement benefits firms in industries with superior profits and in the liberalized period when the choice of the industry segment in which to operate is open to firms thereafter industry effects dissipate business group effects matter in explaining profitability variances group effects magnitudes however do not change significantly over time

does deposit insurance retard the development of non bank financial markets whether and how the introduction of deposit insurance affects non bank financial market development depends on whether banks and non bank financial markets are substitutes or complements and theory has conflicting views using data on 134 countries over a 28 year period and several identification strategies we find that the introduction of deposit insurance retards the equity market the non bank depositaries sector and the banking sector when law and order is weak while strong law and order mitigates this effect it does not lead to a positive outcome for all markets for non bank financial markets the effect is greater in the long run so that while deposit insurance increases banking sector development in the long run it retards non bank financial markets regardless of the level of law and order finally several design features exacerbate the negative outcomes our results have important policy implications for implementing or altering deposit insurance schemes

the role of american depositary receipts in the development of emerging equity markets this paper finds that the growth and expansion of u s cross listings by firms from emerging markets around the world facilitated an expansion of cross border equity flows and overall development of their stock markets during the 1990s however these benefits have negative spillover effects the capitalization and turnover ratios of local market firms that do not pursue overseas listings decline as u s cross listings in the form of american depositary receipts adrs increase in size and scope we investigate various possible sources of these negative spillovers and offer new evidence that the growth of adrs neither facilitates nor hinders local market development but represent an outcome of poorly functioning local markets policy implications are discussed

do institutional factors influence cross border portfolio equity flows new evidence from emerging markets abstract we exploit a proprietary database containing foreign trading data from 20 stock exchanges for the 2006 2018 period to expand the existing evidence on cross border equity flows towards emerging markets in particular after briefly assessing the relevance of push and pull factors we study whether explicit and implicit barriers to investment corporate governance standards and market structure features influence cross border equity inflows we find that pull factors are an important determinant of foreign inflows while push factors have a smaller influence more importantly we find that removing explicit barriers to investment and adopting stricter corporate governance practices has a long run positive relation with inflows conditional on push and pull factors removing information barriers also matters but relatively less market structure features have instead little influence on cross border flows towards emerging markets

risk taking global diversification and growth this paper develops a continuous time stochastic model in which international risk sharing can yield substantial welfare gains through its effect on expected consumption growth the mechanism linking global diversification to growth is an attendant world portfolio shift from safe low yield capital to riskier high yield capital the presence of these two types of capital captures the idea that growth depends on the availability of an ever increasing array of specialized hence inherently risky production inputs calibration exercises using consumption and stock market data imply that most countries reap large steady state welfare gains from global financial integration copyright 1994 by american economic association

stock markets corporate finance and economic growth during the past decade the capitalization of emerging markets increased twentyfold in 1994 trading on these markets accounted for about 17 percent of the 9 6 trillion of shares traded on the world s stock markets up from a mere 3 percent of the much smaller 1 6 trillion in 1985 this rapid growth in emerging stock market activity raises critical questions for developing country policymakers what effect do stock markets have on economic growth how does stock market development affect firms financing decision and if stock markets are good for growth what policies can governments adopt to foster their development this note summarizes answers to these questions drawn from a recent research project

an empirical investigation of international asset pricing we investigate several asset pricing models in an international setting we use data on a large number of assets traded in the united states japan the united kingdom and france the models together with the hypothesis of capital market integration imply testable restrictions on multivariate regressions relating asset returns to various benchmark portfolios we find that multifactor models tend to outperform single index models in both domestic and international forms especially in their ability to explain seasonality in asset returns we also find that the behavior of the models is affected by changes in the regulatory environment in international markets

is financial globalization beneficial this lecture examines whether financial globalization is beneficial to developing countries by first examining the evidence on financial development and economic growth and concludes that financial development is indeed a key element in promoting economic growth it then asks why if financial development is so beneficial it often does not occur it then goes on to examine whether globalization particularly of the financial kind can help encourage financial and economic development and argues that it can however financial globalization does not always work to encourage economic development because it often leads to devastating financial crises the issue is thus not whether financial globalization is inherently good or bad but whether it can be done right

from institutions to financial development and growth what are the links this paper presents an integrated overview of the literature linking institutions financial development and economic growth from the large body of research on institutional development the paper first selects those contributions that make it possible to study the role of institutional arrangements in ameliorating worsening the information frictions and transaction costs that characterize the development of financial markets the paper then investigates the theoretical mechanisms by which these specific frictions affect economic growth and presents the stock of empirical evidence quantifying the impact of institutions on growth through financial development

financial development and economic growth the role of stock markets utilizing time series methods and data from five developed economies we examine the relationship between stock market development and economic growth controlling for the effects of the banking system and stock market volatility our results support the view that although both banks and stock markets may be able to promote economic growth the erects of the former are more powerful they also suggest that the contribution of stock markets on economic growth may have been exaggerated by studies that utilize cross country growth regressions

international risk sharing and economic growth international risk sharing which diversifies away income risk will reduce saving with constant relative risk aversion if growth arises from the external effects of human capital accumulation then reducing saving will reduce growth welfare also may fall with risk sharing because endogenous growth with external effects of capital accumulation typically implies a competitive equilibrium growth rate already less than the optimal growth rate we demonstrate these results in a standard representative agent economy diversifying away rate of return risk also will reduce saving and growth rates if relative risk aversion exceeds one but this diversification always increases welfare this paper studies the effects of international risk sharing portfolio diversification in a world economy in which growth rates of income are endogenous growth is based upon the spillover effects of human capital accumulation as in lucas 1988 and romer 1986 there are positive economy wide spillovers of human capital intensity on individual labour productivity in section 2 we construct a multi country growth model with an infinitely lived representative agent in each country each country faces income risk but there is no aggregate uncertainty at the world level we focus on two market structures in the first structure there are no markets which allow for international diversification of country specific income risk in the second structure there are complete international markets for risksharing with no aggregate world uncertainty this completeness allows full diversification of country specific risk the paper has two central results first growth rates in all countries are lower in the equilibrium with full diversification second in this same structure welfare of each country may be lower than in an equilibrium without risk sharing the reasoning is as follows with external effects of capital accumulation the compet

stock markets corporate finance and economic growth an overview the research presented here focuses on four issues first it constructs more measures or criteria of stock market development than any previous study it compares liquidity concentration volatility institutional development and international integration across forty four industrial and developing countries from 1976 to 1993 besides identifying general characteristics of these measures and defining stock market development empirically these data facilitate further research into the relationship between stock market development and financial intermediaries corporate finance decisions and economic growth these measures ranked for each country can be used for inter country comparisons of the level of stock market development in addition the data provide a basis for gauging the success of capital market development projects using objective criteria second with these new data the research investigates the relationships between stock markets and financial intermediaries third the research analyzes the relationship between stock market development and long run economic growth fourth the research studies the ties between stock market development and financing choices of firms this overview puts this research in context and reviews the main results of the study section i provides a brief review of the role of stock markets in economic development and documents the evolution of debt and equity markets during the growth process section ii defines stock market development and presents summary data on the development of financial intermediaries and stock markets section iii presents evidence on the effect of stock market development on economic growth section iv summarizes the empirical results on how stock market development affects firm financing decisions section v concludes by discussing policy implications

non linear growth effects of financial development does financial integration matter using both macro and industry level data this paper analyses the non linear effects of financial development and international financial integration on economic growth in europe special attention is devoted to modeling threshold effects with respect to the depth of financial markets as a measure of economies absorption capacity results reveal evidence of significant non linear effects with less developed european countries gaining more from financial development in contrast benefits of international financial integration become significant at higher levels of financial development the data show that monetary integration in europe significantly contributed to a higher degree of financial integration entry of new eu members to the european monetary union may thus be the mechanism ensuring a virtuous development circle as the adoption of the euro may allow the development of domestic financial markets and financial integration to go hand in hand

supply chain decision making will shorter cycle times and shared point of sale information necessarily help using a simulated supply chain experiment based on the well known beer game we examine how changes in order and delivery cycles availability of shared point of sale pos information and the pattern of customer demand affect supply chain efficiency we find that speeding up cycle time is beneficial but the sharing of pos information is not necessarily so whether or not the sharing of pos information is beneficial depends on the nature of the demand pattern represented by the pos information if the demand pattern conveys continual change in ultimate downstream customer demand as does an s shaped demand pattern the pos information can distract the upstream decision maker from what is perhaps more immediately relevant information orders placed by the proximate downstream agent and the supply line

international financial integration and economic growth abstract this paper uses new data and new econometric techniques to investigate the impact of international financial integration on economic growth and also to assess whether this relationship depends on the level of economic development financial development legal system development government corruption and macroeconomic policies using a wide array of measures of international financial integration for 57 countries and an assortment of statistical methodologies we are unable to reject the null hypothesis that international financial integration does not accelerate economic growth even when controlling for particular economic financial institutional and policy characteristics

transactions costs technological choice and endogenous growth abstract hicks a theory of economic history clarendon press oxford 1969 argues that an important aspect of industrial development is the adoption of technologies requiring highly illiquid capital investments the adoption of such technologies becomes economically viable in the presence of low cost financial markets that provide liquidity to investors this observation provides a mechanism by which the costs of transacting in financial markets affect the equilibrium choice of technology productive efficiency and by implication growth we analyze how the costs of financial market transactions affect the set of technologies in use and the equilibrium growth rate transactions cost reductions may depending on the capital structure enhance or reduce growth journal of economic literature classification numbers d90 e13 g14

capital control liberalization and stock market development the authors address two questions what happens to stock market size liquidity volatility and integration with world capital markets after capital controls are liberalized and what is the relationship between those indicators of stock market development and regulations about information disclosure accounting standards and investor protection an analysis of data on stock markets in 16 developing countries suggests the following a stock markets become larger more liquid more integrated internationally and more volatile after controls on capital and dividend flows are liberalized b easy access to information about firms is positively associated with the size and liquidity of stock markets and c countries that officially establish internationally accepted accounting standards and laws to protect investors do not have substantially better functioning stock markets than countries that do not adopt those official standards

regulation of capital flows effects on liquidity and the role of financial reporting quality abstract capital controls as restrictions on capital flows are a tool proposed as a cure to the destabilizing market movements of the 1970s i e tobin 1978 despite the criticism that they have received edwards 1999 capital controls resurfaced during the european financial crisis and the restrictions imposed on capital flows in cyprus and greece these were the first instances of capital control implementation in the european union s history and had various effects on firms financial positions by using a sample of eu countries and distinguishing between austerity and capital controls periods we assess the effects of capital controls on the stock liquidity of firms all of the sample countries have a common financial reporting framework international financial reporting standards ifrs and some of them implemented a range of different measures from less intensive such as increases in tax rates to more intensive such as the enforcement of capital controls in their effort to stabilize their economies for the task at hand we specifically engage two accounting determinants of information asymmetry namely conditional conservatism and the level of earnings management our results show that financial reporting quality as measured by higher conditional conservatism and lower earnings management is beneficial for liquidity however during the capital controls period the relation between conditional conservatism and liquidity becomes negative and this negative relation relates to less risky firms thus the negative relation between conditional conservatism and liquidity is likely due to investors keeping more conservative firms in their portfolios as a measure against the crisis

financial development and economic growth views and agenda this critique argues that the preponderance of theoretical reasoning and empirical evidence suggests a positive first order relationship between financial development and economic growth the body of work would push even most skeptics toward the belief that the development of financial markets and institutions is a critical and inextricable part of the growth process and away from the view that the financial system is an inconsequential sideshow responding passively to economic growth many gaps remain however and the paper highlights areas in acute need of additional research

comparative advantage and the gains from financial trade a reappraisal emerging market crises have suggested that a national benefit cost assessment of external financial liberalisation could well pro ve unfavourable this paper re examines the principle of comparative advantage in its application and international migration we distinguish between those arising in f inancial trade from the net transfer of capital and those deri ving from the contemporaneous exchange of f inancial claims or services of equivalent is on the contractual risk return characteristics of the financial claims exchanged this perspective is applied firstly to portfolio diversification gains arising from further international stock market integration secondly price risk management for developing countries in international primary commodity trade is discussed both applications imply the need for significant institutional development but could reali se approximately contemporaneous gains reminiscent both of those involved in merchandise trade and in the skills and product or service flows that baloo has emphasis ed in relation to fdi and international migration