Document Type

Article

Publication Date

8-2007

Source Publication

United Nations Economic Commission for Europe Discussion Papers Series

Source ISSN

97802302017

Abstract

We estimate the effect of financial openness on economic integration for two clusters of countries: the formerly planned economies of Eastern Europe and central Asia (emerging market economies) and some western advanced economies. We focus on two dimensions of economic integration: convergence of per-capita incomes across countries and trade integration. We employ both single equation estimation and system estimation to account for endogenous links between trade integration and income convergence. Results show that in the cluster of emerging market economies, financial openness is a powerful instrument of economic integration. In the group of advanced economies, financial openness effectively facilitates income convergence, but its impact on trade integration is ambiguous.

Comments

Published version. UNECE Discussion Papers, No. 2007.4 (August 2007). Permalink. © United Nations Economic Commission for Europe 2007. Used with permission.