Motivated by the action plan for a European capital markets union (CMU), this paper analyzes the potential for legal harmonization and convergence in institutional quality to affect capital market integration. Based on hand-collected data on the implementation of EU-directives, our analysis...

One of the reasons for governments to employ capital controls is to obtain some degree of monetary independence. In this paper we test whether capital controls can reduce the link between exchange rates fluctuations and cross border interest differentials. Recent capital control proxies are used...

Portfolio rebalancing is a key driver of the Uncovered Equity Parity (UEP) condition. According to UEP, when foreign equity holdings outperform domestic holdings, domestic investors are exposed to higher exchange rate exposure and hence repatriate some of the foreign equity to decrease their...

This paper proposes a new perspective on systematic deviations from purchasing power parity. Panel evidence for OECD countries shows that international financial integration increases the national price level under managed exchange rate regimes and lowers the price level under floating exchange...

We analyze the second-moment properties of the components of international capital flows and their relationship to business cycle variables (output, investment, and the real interest rate) in 22 industrial and emerging countries. Total inward flows are procyclical with respect to all three macro...

We examine cross-region capital mobility in China and track how the degree of mobility has changed over time. The effects of fiscal and redistributive activities of different levels of government in China on private capital mobility are taken into account. Our results indicate that there was a...

Using a panel dataset covering 139 countries over the 1970–2009 period, we empirically investigate the role of foreign direct investment on growth through diffusion of technology and innovation. Using an otherwise standard growth regression and regressions on productivity growth, we introduce...

National borders continue to be strong barriers for mergers and acquisitions in Europe. Using regional data, we construct a gravity model and find that the restraining impact of national borders decreased by more than 17 percent between 1991 and 2007. However, no significant change has occurred...

The present paper examines the degree of comovement of gross capital inflows, which is a highly sensitive issue for policy makers. We estimate a dynamic hierarchical factor model that is able to decompose inflows in a sample of 47 economies into (i) a global factor common to all types of flows...

The banking literature focuses extensively on the phenomenon of bank entry and pays less attention to the factors driving the continuation of banking activities in foreign markets. In this paper, we analyze this important, but overlooked, issue by constructing a unique database of foreign banks...