IDEAS home Printed from https://ideas.repec.org/a/bla/ausecp/v63y2024i4p729-745.html
   My bibliography  Save this article

International financial integration and financial depth: New evidence from an asymmetry analysis

Author

Listed:
  • Massomeh Hajilee
  • Farhang Niroomand
  • Linda A. Hayes

Abstract

In the field of international finance, there is a large role for international financial market integration and financial depth by contributing to the global financial system and enhancing financial system power through easier access to sufficient funds of government and private sectors. This research aims to determine the short‐run and long‐run impact of financial depth on international financial market integration in eight selected countries over the period of 1980–2021 in both a linear and nonlinear model, while providing the opportunity to assess the asymmetric impact of financial depth on international financial market integration. After estimating the models, we show that financial depth has significant short‐run and long‐run effects in most of our sample countries in the linear mode. We also show that the long‐run impact of financial depth on financial market integration is asymmetric in all eight countries, concluding that financial depth and risks associated with it play an important role in international financial market integration, and it is important for countries to select and implement adequate financial market policies to take advantage of this relationship.

Suggested Citation

  • Massomeh Hajilee & Farhang Niroomand & Linda A. Hayes, 2024. "International financial integration and financial depth: New evidence from an asymmetry analysis," Australian Economic Papers, Wiley Blackwell, vol. 63(4), pages 729-745, December.
    • Handle: RePEc:bla:ausecp:v:63:y:2024:i:4:p:729-745
    DOI: 10.1111/1467-8454.12368
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1467-8454.12368
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1467-8454.12368?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Mody, Ashoka & Sarno, Lucio & Taylor, Mark P., 2007. "A cross-country financial accelerator: Evidence from North America and Europe," Journal of International Money and Finance, Elsevier, vol. 26(1), pages 149-165, February.
    2. Mohsen Bahmani-Oskooee & Majid Maki Nayeri, 2018. "Policy Uncertainty and the Demand for Money in Canada: A Nonlinear Approach," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot GmbH, Berlin, vol. 64(4), pages 279-295.
    3. Baxter, Marianne & Crucini, Mario J, 1995. "Business Cycles and the Asset Structure of Foreign Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 821-854, November.
    4. Jean Imbs & Romain Wacziarg, 2003. "Stages of Diversification," American Economic Review, American Economic Association, vol. 93(1), pages 63-86, March.
    5. Heathcote, Jonathan & Perri, Fabrizio, 2002. "Financial autarky and international business cycles," Journal of Monetary Economics, Elsevier, vol. 49(3), pages 601-627, April.
    6. Mohsen Bahmani-Oskooee & Majid Maki Nayeri, 2018. "Policy Uncertainty and the Demand for Money in Canada: A Nonlinear Approach," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot GmbH, Berlin, vol. 64(4), pages 279-295.
    7. Mohsen Bahmani‐Oskooee & Ridha Nouira & Sami Saafi, 2023. "Whose policy uncertainty affects commodity trade between Australia and the United States?," Australian Economic Papers, Wiley Blackwell, vol. 62(1), pages 101-123, March.
    8. M. Ayhan Kose & Christopher Otrok & Eswar Prasad, 2012. "Global Business Cycles: Convergence Or Decoupling?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(2), pages 511-538, May.
    9. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, vol. 88(3), pages 537-558, June.
    10. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    11. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
    12. Raja Kali & Fabio Mendez & Javier Reyes, 2007. "Trade structure and economic growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 16(2), pages 245-269.
    13. Kimberly A. Clausing & Cosmina L. Dorobantu, 2005. "Re‐entering Europe: Does European Union candidacy boost foreign direct investment?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(1), pages 77-103, January.
    14. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    15. Mohsen Bahmani‐Oskooee & Majid Maki Nayeri, 2018. "Policy Uncertainty and the Demand for Money in Australia: an Asymmetry Analysis," Australian Economic Papers, Wiley Blackwell, vol. 57(4), pages 456-469, December.
    16. Mohsen Bahmani-Oskooee & Majid Maki Nayeri, 2018. "Policy Uncertainty and the Demand for Money in Korea: An Asymmetry Analysis," International Economic Journal, Taylor & Francis Journals, vol. 32(2), pages 219-234, April.
    17. Nicola Cetorelli & Linda S Goldberg, 2011. "Global Banks and International Shock Transmission: Evidence from the Crisis," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 59(1), pages 41-76, April.
    18. Massomeh Hajilee & Farhang Niroomand, 2018. "The impact of interest rate volatility on financial market inclusion: evidence from emerging markets," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 42(2), pages 352-368, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mazhar Mahmood & Kashif ur Rehman, 2017. "Did Financial Integration Provide Financial Depth to ASEAN Countries?," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(1), pages 89-102, March.
    2. Nusair, Salah A. & Olson, Dennis & Al-Khasawneh, Jamal A., 2024. "Asymmetric effects of economic policy uncertainty on demand for money in developed countries," The Journal of Economic Asymmetries, Elsevier, vol. 29(C).
    3. Long, Shaobo & Zuo, Yulan & Tian, Hao, 2023. "Asymmetries in multi-target monetary policy rule and the role of uncertainty: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 278-296.
    4. Davis, J. Scott, 2014. "Financial integration and international business cycle co-movement," Journal of Monetary Economics, Elsevier, vol. 64(C), pages 99-111.
    5. J. Scott Davis, 2011. "Financial integration and international business cycle co-movement: the role of balance sheets," Globalization Institute Working Papers 89, Federal Reserve Bank of Dallas.
    6. Sin-Yu Ho & N.M. Odhiambo, 2018. "Analysing the macroeconomic drivers of stock market development in the Philippines," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1451265-145, January.
    7. Gabriel Caldas Montes & Pedro Salgado, 2024. "Economic policy uncertainties and business confidence in Japan," Economics Bulletin, AccessEcon, vol. 44(1), pages 38-56.
    8. Charles O. Manasseh & Timothy E. Mathew & Jonathan E. Ogbuabor, 2017. "Investigating the Nexus between Institutional Quality and Stock Market Development in Nigeria: An Autoregressive Distributed Lag (ARDL) Approach," African Development Review, African Development Bank, vol. 29(2), pages 272-292, June.
    9. Ho, Sin-Yu, 2017. "The Macroeconomic Determinants of Stock Market Development: Evidence from Malaysia," MPRA Paper 77232, University Library of Munich, Germany.
    10. Sin-Yu Ho, 2019. "The macroeconomic determinants of stock market development in Malaysia: an empirical analysis," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 21(2), pages 174-193.
    11. Ho, Sin-Yu, 2017. "The Macroeconomic Determinants of Stock Market Development: Evidence from South Africa," MPRA Paper 76493, University Library of Munich, Germany.
    12. Alarudeen Aminu Ph.D & Isiaka Akande Raifu & Bolanle Deborah Oloyede, . "Financial Development and Manufacturing Output Growth Nexus in Nigeria: The Role Of Institutional Quality," Journal of Economic and Sustainable Growth 2, Office Of The Chief Economist, Development Bank of Nigeria.
    13. Mehmet Balcilar & Serhan Çiftçioğlu & Hasan Güngör, 2016. "The Effects Of Financial Development On Investment In Turkey," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(04), pages 1-21, September.
    14. Sin-Yu Ho & Nicholas M. Odhiambo, 2019. "The macroeconomic drivers of stock market development: evidence from Hong Kong," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 12(2), pages 185-207, July.
    15. Hajilee, Massomeh & Stringer, Donna Y. & Metghalchi, Massoud, 2017. "Financial market inclusion, shadow economy and economic growth: New evidence from emerging economies," The Quarterly Review of Economics and Finance, Elsevier, vol. 66(C), pages 149-158.
    16. S. M. Woahid Murad & Ruhul Salim & Md. Golam Kibria, 2021. "Asymmetric Effects of Economic Policy Uncertainty on the Demand for Money in India," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 19(3), pages 451-470, September.
    17. Sin-Yu Ho, 2018. "Macroeconomic determinants of stock market development in South Africa," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 14(2), pages 322-342, December.
    18. Monnet, Cyril & Quintin, Erwan, 2007. "Why do financial systems differ? History matters," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1002-1017, May.
    19. Muhammad Shahbaz & Hrushikesh Mallick & Mantu Kumar Mahalik & Shawkat Hammoudeh, 2018. "Is globalization detrimental to financial development? Further evidence from a very large emerging economy with significant orientation towards policies," Applied Economics, Taylor & Francis Journals, vol. 50(6), pages 574-595, February.
    20. Parmendra Sharma & Eduardo Roca, 2011. "Reâ Designing Financial Systems: A Review of the Role of Stock Markets in Developing Economies," Discussion Papers in Finance finance:201120, Griffith University, Department of Accounting, Finance and Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ausecp:v:63:y:2024:i:4:p:729-745. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0004-900X .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.