The Integration of Imperfect Financial Markets: Implications for Business Cycle Volatility

Arbeitspapier

During the last two decades, the degree of openness of national financial systems has increased substantially. At the same time, asymmetries in information and other financial market frictions have remain prevalent. We study both empirically and theoretically the implications of the opening up of national financial systems in the presence of financial market frictions for business cycle volatility. In our empirical analysis, we demonstrate that stylised facts suggest that countries with more developed financial systems have lower business cycle volatility. Financial openness has no strong impact on business cycle volatility, in contrast. In our theoretical analysis, we use a dynamic general equilibrium model to study the implications of the opening up of national financial markets and of financial market frictions for business cycle volatility. We find that the implications of opening up national financial markets for business cycle volatility are largely unaffected by the presence of financial market frictions.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Kiel Working Paper ; No. 1161

Classification and Topics

• Classification: Wirtschaft ; Financial Markets and the Macroeconomy ; Current Account Adjustment; Short-term Capital Movements ; Foreign Exchange ; Open Economy Macroeconomics ; Financial Aspects of Economic Integration
• Subject: Business cycle volatility ; Financial frictions ; Financial market integration ; Kapitalmarktliberalisierung ; Internationaler Finanzmarkt ; Unvollkommener Markt ; Marktintegration ; Konjunktur ; Volatilität ; Neue Makroökonomik offener Volkswirtschaften ; Theorie ; Schätzung ; OECD-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Buch, Claudia M. ; Pierdzioch, Christian
• Event: Veröffentlichung
• (who): Kiel Institute for World Economics (IfW)
• (where): Kiel
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/17903
• Last update: 10.03.2025, 11:41 AM CET