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Modeling the Relation of Financial Integration-Economic Growth with GMM and QR Methods

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  • Bilgehan Tekin

Abstract

Although international financial integration is an essential topic in economics and finance disciplines, researchers do not have a clear consensus on the relationship between financial integration and economic growth. The main reason for this situation is that financial integration can be heterogeneous and may differ according to the countries’ income levels. On the other hand, most studies on the subject have accepted that financial integration has a homogeneous effect on growth by using a sample of countries with a heterogeneous structure. In this study, unlike traditional methods, the generalized method of moments and quantile regression analysis allows a comparison according to the countries’ income levels, used together. Fifty-two countries were taken as a basis for the 2000-2019 period. The effect of financial integration and control variables on economic growth was tried to be measured. As a result of the study, direct foreign capital investments, portfolio investments, and current account balance have positive and significant effects on economic growth, and the effects of direct foreign capital and portfolio investments, current account balance, and inflation on economic growth differ between countries with high and low-income levels.

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  • Bilgehan Tekin, 2021. "Modeling the Relation of Financial Integration-Economic Growth with GMM and QR Methods," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 8, pages 32-47.
    • Handle: RePEc:bas:econst:y:2021:i:8:p:32-47
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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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