Working Paper: NBER ID: w31505
Authors: Menzie D. Chinn; Hiro Ito
Abstract: We assess market mediated financial integration over the last fifty years. We first systematically lay out several definitions of financial integration, and then review the evidence regarding whether covered interest parity, uncovered interest parity, and real interest parity hold across industrial and non-industrial countries. Finally we examine what the determinants of real interest differentials are.
Keywords: No keywords provided
JEL Codes: F30; F40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| real interest differentials (E43) | macroeconomic, institutional, and regulatory factors (E02) |
| covered interest parity (F31) | political risks affecting capital mobility (F21) |
| uncovered interest parity (F31) | exchange risk premiums (F31) |
| exchange risk premiums (F31) | deviations in uncovered interest parity (F31) |
| real interest deviations (E43) | macroeconomic factors (E66) |
| improved capital mobility and institutional frameworks (O24) | real interest deviations (E43) |