Financial integration and international business cycle co-movement
International business cycle transmission through integrated financial markets occurs through wealth and balance sheet effects. Balance sheet effects lead to business cycle convergence, but wealth effects lead to divergence. This paper shows empirically that debt market integration has a positive ef...
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| Veröffentlicht in: | Journal of monetary economics 2014-05, Vol.64, p.99-111 |
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| container_title | Journal of monetary economics |
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| creator | Davis, J. Scott |
| description | International business cycle transmission through integrated financial markets occurs through wealth and balance sheet effects. Balance sheet effects lead to business cycle convergence, but wealth effects lead to divergence. This paper shows empirically that debt market integration has a positive effect on co-movement, implying that balance sheet effects are the main conduit for international transmission through integrated debt markets. Equity market integration has a negative effect, implying that wealth effects are the main channel for international transmission through integrated equity markets. Distinguishing between wealth and balance sheet effects resolves some key discrepancies between empirical and theoretical findings in international macroeconomics.
•International equity market integration leads to business cycle divergence.•International debt market integration leads to business cycle convergence.•This is found in a regression of bilateral co-movement on financial integration.•These results can explain many discrepancies in the international macro literature. |
| doi_str_mv | 10.1016/j.jmoneco.2014.01.007 |
| format | Article |
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•International equity market integration leads to business cycle divergence.•International debt market integration leads to business cycle convergence.•This is found in a regression of bilateral co-movement on financial integration.•These results can explain many discrepancies in the international macro literature.</description><subject>Balance sheet effect</subject><subject>Balance sheets</subject><subject>Business cycle co-movement</subject><subject>Business cycle transmissions</subject><subject>Business cycles</subject><subject>Capital market</subject><subject>Debt</subject><subject>Divergence</subject><subject>Economic theory</subject><subject>Equity</subject><subject>Financial integration</subject><subject>International markets</subject><subject>Macroeconomics</subject><subject>Securities markets</subject><subject>Studies</subject><subject>Wealth</subject><subject>Wealth effect</subject><issn>0304-3932</issn><issn>1873-1295</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2014</creationdate><recordtype>article</recordtype><recordid>eNqFkM1LAzEQxYMoWKt_glDw4mXXfG2yOYkWv6DgpfeQzk4ly25Sk22h_71b25MXT8Ob-b2B9wi5ZbRklKmHtmz7GBBiySmTJWUlpfqMTFitRcG4qc7JhAoqC2EEvyRXObeUUma0mpDnVx9cAO-6mQ8DfiU3-BhmLjS_OoVfPV5X2-wD5jyDPXQ4g1j0cYc9huGaXKxdl_HmNKdk-fqynL8Xi8-3j_nTogAp5FA0GgSgFkZxKVdNzV1tnDLABVuDo4aC0hJVw7SUzWrcrxteowZg9QqMElNyf3y7SfF7i3mwvc-AXecCxm22rJJMSaWYGdG7P2gbt2OU7kBxqg2vdDVS1ZGCFHNOuLab5HuX9pZReyjWtvZUrD0UaymzY7Gj7_HowzHszmOyGTwGwMYnhME20f_z4Qe4e4Qa</recordid><startdate>20140501</startdate><enddate>20140501</enddate><creator>Davis, J. Scott</creator><general>Elsevier B.V</general><general>Elsevier Sequoia S.A</general><scope>AAYXX</scope><scope>CITATION</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope></search><sort><creationdate>20140501</creationdate><title>Financial integration and international business cycle co-movement</title><author>Davis, J. Scott</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c434t-d7c3ce7396244bd82a89a69c231fca090c674e6d1744db9c2fd28e7cc18bc963</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2014</creationdate><topic>Balance sheet effect</topic><topic>Balance sheets</topic><topic>Business cycle co-movement</topic><topic>Business cycle transmissions</topic><topic>Business cycles</topic><topic>Capital market</topic><topic>Debt</topic><topic>Divergence</topic><topic>Economic theory</topic><topic>Equity</topic><topic>Financial integration</topic><topic>International markets</topic><topic>Macroeconomics</topic><topic>Securities markets</topic><topic>Studies</topic><topic>Wealth</topic><topic>Wealth effect</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Davis, J. Scott</creatorcontrib><collection>CrossRef</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><jtitle>Journal of monetary economics</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Davis, J. Scott</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Financial integration and international business cycle co-movement</atitle><jtitle>Journal of monetary economics</jtitle><date>2014-05-01</date><risdate>2014</risdate><volume>64</volume><spage>99</spage><epage>111</epage><pages>99-111</pages><issn>0304-3932</issn><eissn>1873-1295</eissn><coden>JMOEDW</coden><abstract>International business cycle transmission through integrated financial markets occurs through wealth and balance sheet effects. Balance sheet effects lead to business cycle convergence, but wealth effects lead to divergence. This paper shows empirically that debt market integration has a positive effect on co-movement, implying that balance sheet effects are the main conduit for international transmission through integrated debt markets. Equity market integration has a negative effect, implying that wealth effects are the main channel for international transmission through integrated equity markets. Distinguishing between wealth and balance sheet effects resolves some key discrepancies between empirical and theoretical findings in international macroeconomics.
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| ispartof | Journal of monetary economics, 2014-05, Vol.64, p.99-111 |
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| language | eng |
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| source | Elsevier ScienceDirect Journals |
| subjects | Balance sheet effect Balance sheets Business cycle co-movement Business cycle transmissions Business cycles Capital market Debt Divergence Economic theory Equity Financial integration International markets Macroeconomics Securities markets Studies Wealth Wealth effect |
| title | Financial integration and international business cycle co-movement |
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