- Title Pages
- Acknowledgments
- Contributors
- 1 International Finance: An Overview
- 2 A Primer on Exchange Rate Behavior
- 3 Markets and International Interest Rate Parity
- 4 Corporate Risk Management in the Multinational Firm
- 5 Central Banks and Economic Policy after the Crisis: What Have We Learned?
- 6 International Financial Integration: Benefits, Costs, and Policy Challenges
- 7 Links between International Financial Markets and Volatility
- 8 Challenges in Financial Regulation
- 9 International Equity Markets: Risk and Return
- 10 International Corporate Debt Markets
- 11 Financing International Trade
- 12 Cross-Listing Behavior
- 13 International Regulatory Regimes
- 14 Asset Pricing in an International Setting
- 15 The Home Bias Puzzle in Equity Portfolios
- 16 Investing in Emerging and Developing Markets
- 17 International Investment Patterns
- 18 Integrated versus Segmented Capital Markets: Implications for Financial Decision-Making
- 19 Multinational Capital Budgeting: Valuing Cross-Border Investments
- 20 Multinational Restructuring
- 21 Corporate Management of Foreign Currency Risk: Conceptual Framework, Policies, and Strategies
- 22 Multinational Cost of Capital and Capital Structure
- 23 Dividend Policy across Countries
- 24 International Governance and Convergence
- 25 Business Bankruptcies across Countries and the Law
- 26 Alternative Financing Methods
- 27 Differences in Ownership Structures across Countries
- 28 Understanding Financial Market Failures
- Discussion Questions and Answers
- Index
International Financial Integration: Benefits, Costs, and Policy Challenges
International Financial Integration: Benefits, Costs, and Policy Challenges
- Chapter:
- (p.110) 6 International Financial Integration: Benefits, Costs, and Policy Challenges
- Source:
- International Finance
- Author(s):
PIERRE-RICHARD AGÉNOR
- Publisher:
- Oxford University Press
This chapter reviews the recent analytical and empirical literature on the benefits and costs of international financial integration and the policy challenges that it creates. The chapter also discusses the impact of financial openness and capital flows on consumption, investment, and growth, as well as the impact of foreign bank entry on the domestic financial system. The argument is made that, for small open developing countries, the benefits of financial integration are mostly long term in nature, whereas risks can be significant in the short run. Careful preparation and management—notably by strengthening bank regulation and supervision and by adopting a more flexible monetary policy framework, possibly supplemented by countercyclical regulatory rules and temporary controls on short-term capital flows—are therefore essential. Cross-border regulation of systemically important financial institutions is also required to mitigate the impact of destabilizing capital flows, but care is needed in imposing micro-based prudential rules to avoid unintended general equilibrium consequences.
Keywords: financial integration, capital flows, contagion, capital controls
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- Title Pages
- Acknowledgments
- Contributors
- 1 International Finance: An Overview
- 2 A Primer on Exchange Rate Behavior
- 3 Markets and International Interest Rate Parity
- 4 Corporate Risk Management in the Multinational Firm
- 5 Central Banks and Economic Policy after the Crisis: What Have We Learned?
- 6 International Financial Integration: Benefits, Costs, and Policy Challenges
- 7 Links between International Financial Markets and Volatility
- 8 Challenges in Financial Regulation
- 9 International Equity Markets: Risk and Return
- 10 International Corporate Debt Markets
- 11 Financing International Trade
- 12 Cross-Listing Behavior
- 13 International Regulatory Regimes
- 14 Asset Pricing in an International Setting
- 15 The Home Bias Puzzle in Equity Portfolios
- 16 Investing in Emerging and Developing Markets
- 17 International Investment Patterns
- 18 Integrated versus Segmented Capital Markets: Implications for Financial Decision-Making
- 19 Multinational Capital Budgeting: Valuing Cross-Border Investments
- 20 Multinational Restructuring
- 21 Corporate Management of Foreign Currency Risk: Conceptual Framework, Policies, and Strategies
- 22 Multinational Cost of Capital and Capital Structure
- 23 Dividend Policy across Countries
- 24 International Governance and Convergence
- 25 Business Bankruptcies across Countries and the Law
- 26 Alternative Financing Methods
- 27 Differences in Ownership Structures across Countries
- 28 Understanding Financial Market Failures
- Discussion Questions and Answers
- Index
