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This paper documents the evolution of measures of financial integration for major advanced and emerging markets economies, assesses whether advances in integration have had a significant positive impact on countries' risk-adjusted growth opportunities, and identifies some of the channels through which financial integration may foster growth. Three main results obtain. First, financial integration has progressed significantly worldwide, particularly in emerging markets, and regional integration has advanced at the fastest pace in Europe. Second, a country's speed of integration predicts future country's risk-adjusted growth opportunities, while improved risk-adjusted growth opportunities predict future advances in integration, indicating that the countries whose integration has been faster may have benefited most from a virtuous dynamics in which financial integration and improved real prospects are mutually reinforcing. Third, financial integration predicts globalization but the reverse does not necessarily hold, while advances in financial integration predict advances in financial development and improvements in the liquidity of equity markets.

International economic integration. --- Globalization. --- Liquidity (Economics) --- Assets, Frozen --- Frozen assets --- Global cities --- Globalisation --- Internationalization --- Common markets --- Economic integration, International --- Economic union --- Integration, International economic --- Markets, Common --- Union, Economic --- Finance --- International relations --- Anti-globalization movement --- International economic relations --- Finance: General --- Investments: Stocks --- General Financial Markets: General (includes Measurement and Data) --- Financial Markets and the Macroeconomy --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Investment & securities --- Financial integration --- Stock markets --- Financial sector development --- Stocks --- Emerging and frontier financial markets --- International finance --- Financial services industry --- Stock exchanges --- Hong Kong Special Administrative Region, People's Republic of China

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We argue that firm interdependencies, as measured by correlations of stock returns, provide an indicator of systemic risk potential. We find a positive trend in stock return correlations net of diversification effects for a sample of U.S. Large and Complex Banking Organizations over 1988-99. This finding suggests that the systemic risk potential in the financial sector may have increased. In addition, we find a positive consolidation elasticity of correlations. However, such elasticity exhibits substantial time variation and likely declined in the latter part of the decade. Thus, factors other than consolidation have also been responsible for the upward trend in return correlations.

Banks and Banking --- Finance: General --- Investments: Stocks --- Industries: Financial Services --- General Financial Markets: Government Policy and Regulation --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Finance --- Investment & securities --- Banking --- Systemic risk --- Stocks --- Financial sector risk --- Loans --- Financial sector policy and analysis --- Financial institutions --- Commercial banks --- Financial risk management --- Banks and banking --- United States

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This paper presents a modeling framework that delivers joint forecasts of indicators of systemic real risk and systemic financial risk, as well as stress-tests of these indicators as impulse responses to structural shocks identified by standard macroeconomic and banking theory. This framework is implemented using large sets of quarterly time series of indicators of financial and real activity for the G-7 economies for the 1980Q1-2009Q3 period. We obtain two main results. First, there is evidence of out-of sample forecasting power for tail risk realizations of real activity for several countries, suggesting the usefulness of the model as a risk monitoring tool. Second, in all countries aggregate demand shocks are the main drivers of the real cycle, and bank credit demand shocks are the main drivers of the bank lending cycle. These results challenge the common wisdom that constraints in the aggregate supply of credit have been a key driver of the sharp downturn in real activity experienced by the G-7 economies in 2008Q4- 2009Q1.

Banks and Banking --- Finance: General --- Inflation --- Money and Monetary Policy --- Industries: Financial Services --- Econometrics --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- General Financial Markets: Government Policy and Regulation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Price Level --- Deflation --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- Finance --- Monetary economics --- Banking --- Macroeconomics --- Econometrics & economic statistics --- Bank credit --- Systemic risk --- Loans --- Financial sector policy and analysis --- Money --- Financial institutions --- Prices --- Vector autoregression --- Econometric analysis --- Credit --- Financial risk management --- Banks and banking --- United States --- Risk. --- Macroeconomics.

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This paper presents a modeling framework that delivers joint forecasts of indicators of systemic real risk and systemic financial risk, as well as stress-tests of these indicators as impulse responses to structural shocks identified by standard macroeconomic and banking theory. This framework is implemented using large sets of quarterly time series of indicators of financial and real activity for the G-7 economies for the 1980Q1-2009Q3 period. We obtain two main results. First, there is evidence of out-of sample forecasting power for tail risk realizations of real activity for several countries, suggesting the usefulness of the model as a risk monitoring tool. Second, in all countries aggregate demand shocks are the main drivers of the real cycle, and bank credit demand shocks are the main drivers of the bank lending cycle. These results challenge the common wisdom that constraints in the aggregate supply of credit have been a key driver of the sharp downturn in real activity experienced by the G-7 economies in 2008Q4-2009Q1.

Zonder onderwerpscode: economie