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How does terms-of-trade behavior shape international financial integration in primary-commodity exporting economies?

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  • Saif Al-Abri, Almukhtar

Abstract

This paper presents empirical evidence suggesting that the volatility, trend-growth, and shock-duration of terms-of-trade (TOT) are important drivers of the degree and composition of international financial integration (IFI). Our results are based on a panel of 55 primary-commodity exporting countries during 1980–2007. The findings reveal that TOT trend-growth has larger impact on IFI compared to TOT volatility. Also, higher TOT volatility is robustly associated with greater cross-holdings of foreign assets and lower cross-holdings of foreign liabilities. Another notable finding is that longer duration of TOT shocks seems to shift IFI towards equity assets.

Suggested Citation

  • Saif Al-Abri, Almukhtar, 2014. "How does terms-of-trade behavior shape international financial integration in primary-commodity exporting economies?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 33(C), pages 335-353.
    • Handle: RePEc:eee:intfin:v:33:y:2014:i:c:p:335-353
    DOI: 10.1016/j.intfin.2014.09.002
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    More about this item

    Keywords

    Terms-of-trade; Financial globalization; International investment positions; Foreign direct investment; Portfolio investment; Developing countries;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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