Crises, Capital Controls, and Financial Integration
 This paper analyzes the effects of capital controls and crises on financial integration, using stocks from emerging economies that trade in both domestic and international markets. The cross-market premium (the ratio between the domestic and the international market price of cross-listed stocks) provides a valuable measure of how capital controls and crises affect international financial integration. The paper shows that, contrary to the common perception that capital controls can be easily evaded, they do affect the cross-market premium in a sustainable way. Controls on capital inflows put downward pressure on domestic markets relative to international ones, generating a negative premium. The opposite happens with controls on capital outflows. This signals the inability of market participants to engage in perfect arbitrage, due to the segmentation of domestic markets from international ones. Crises affect financial integration by generating more volatility in the premium and putting more downward pressure on domestic prices.
Download this Paper [ PDF 206.4KB| 27 pages ].
Post a CommentWe welcome your feedback on this publication. Post a comment. ADBI is not obliged to acknowledge or publish comments and may abridge or edit them before web posting. Comment(s)
There are [0] comment(s) for this entry. Post a comment.
|
The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.
|
|
About ADBINews & EventsSpecial ProgramsPartnerships
Publications
Back to Top
