Calderón, CésarKubota, Megumi2012-03-192012-03-192009-06-01https://hdl.handle.net/10986/4166Advanced and emerging market economies have rapidly integrated into international capital markets and this growing globalization of financial markets has led to some important changes in the patterns of saving and investment across the world. The main goal of this paper is to test whether the cross-border asset trade has led to improvements in the intermediation of these savings -- that is, foster development of domestic financial markets. The authors have collected annual information on financial market development, financial openness, and other control variables for a sample of 145 countries for the period 1974-2007. Controlling for the likely endogeneity of financial openness, the analysis finds that rising financial openness expands private credit, bank assets, and stock market and private bond market development, and generates efficiency gains in the banking system. However, the impact of financial openness on domestic financial development may depend on the level of institutional quality, the extent of investor protection, and the degree of trade openness. In general, rising financial openness will enlarge the size and activity of financial intermediaries, improve efficiency in the banking system, and contribute to deepen private bond markets in countries with moderate to high levels of institutional quality and investor protection as well as in countries with high trade openness.CC BY 3.0 IGOACCOUNTINGACCOUNTING STANDARDSACCUMULATION OF DEBTADVANCED COUNTRIESADVERSE SELECTIONAGENCY PROBLEMSASSET HOLDINGSBAILOUTBALANCE SHEETSBANK ASSETSBANK CREDITBANK CREDITSBANK DEPOSITBANK DEPOSITSBANK LOANSBANK POLICYBANKING CRISISBANKING SECTORBANKING SYSTEMBANKING SYSTEMSBOND MARKETBOND MARKET CAPITALIZATIONBOND MARKET DEVELOPMENTBOND MARKETSBONDSBOOM-BUST CYCLESBUREAUCRATIC QUALITYCAPITAL ACCOUNTCAPITAL ACCOUNTSCAPITAL FLOWCAPITAL FLOWSCAPITAL INFLOWSCAPITAL MARKETCAPITAL MARKET LIBERALIZATIONCAPITAL REQUIREMENTSCAPITAL STRUCTURECENTRAL BANKCENTRAL BANKSCIVIL CODECOMMERCIAL BANKCOMMERCIAL BANKINGCOMMERCIAL BANKSCOMMON LAWCONSUMER PRICE INDEXCONTRACT ENFORCEMENTCOST OF CAPITALCOUNTRY RISKCREDITORCREDITORSCURRENCYCURRENCY CRISISDEBTDEFAULT RATESDEPOSITDEPOSIT INSURANCEDEPOSIT MONEY BANKSDEPOSITSDERIVATIVESDEVELOPING COUNTRIESDOMESTIC BANKINGDOMESTIC BANKING MARKETSDOMESTIC BONDDOMESTIC BOND MARKETSDOMESTIC CAPITALDOMESTIC CAPITAL MARKETSDOMESTIC CREDITDOMESTIC CURRENCYDOMESTIC DEBT SECURITIESDOMESTIC ECONOMYDOMESTIC FINANCIAL MARKETDOMESTIC FINANCIAL MARKETSDOMESTIC MARKETDUMMY VARIABLESEMERGING ECONOMIESEMERGING MARKETEMERGING MARKET ECONOMIESEMERGING MARKET FIRMSEMERGING MARKETSENFORCEMENT MECHANISMSEQUITY MARKETSEXCHANGE RATEEXCHANGE RATESEXTERNAL ASSETEXTERNAL ASSETSEXTERNAL FINANCEFEDERAL RESERVEFEDERAL RESERVE BANKFEDERAL RESERVE SYSTEMFINANCIAL ASSETSFINANCIAL CONTRACTSFINANCIAL CRISESFINANCIAL DEREGULATIONFINANCIAL DEVELOPMENTFINANCIAL FLOWSFINANCIAL INFRASTRUCTUREFINANCIAL INSTITUTIONSFINANCIAL INTERMEDIARIESFINANCIAL LIBERALIZATIONFINANCIAL MARKETFINANCIAL MARKET DEVELOPMENTFINANCIAL OPENNESSFINANCIAL SECTORFINANCIAL SECTOR DEVELOPMENTFINANCIAL SERVICESFINANCIAL SYSTEMFINANCIAL SYSTEMSFOREIGN ASSETFOREIGN BANKSFOREIGN DIRECT INVESTMENTGLOBAL ECONOMYGLOBALIZATIONGROWTH RATESINCOME LEVELINCOME LEVELSINDUSTRIAL COUNTRIESINFLATIONINFLATION RATEINFLATION RATESINFORMATION ASYMMETRYINFORMATION DISCLOSUREINSTITUTIONAL DEVELOPMENTINSTRUMENTINSURANCE COMPANIESINSURANCE PENETRATIONINTEREST RATEINTEREST RATESINTERNATIONAL BANKINTERNATIONAL CAPITALINTERNATIONAL CAPITAL MARKETSINTERNATIONAL ECONOMICSINTERNATIONAL FINANCEINTERNATIONAL FINANCIAL INTEGRATIONINTERNATIONAL FINANCIAL MARKETSINTERNATIONAL FINANCIAL STATISTICSINTERNATIONAL INVESTMENTINTERNATIONAL MARKETSINTERNATIONAL TRADEINVESTOR PROTECTIONLIABILITYLIFE INSURANCELIFE INSURANCE CONTRACTSLIFE INSURANCE PREMIUMLINES OF CREDITLIQUIDITYLIQUIDITY PROBLEMSLOANLOCAL CURRENCYLOCAL DEBTLOCAL DEBT MARKETSLOCAL FINANCIAL MARKETSLOCAL MARKETSLOCAL STOCK MARKETLOCAL STOCK MARKETSMACROECONOMIC STABILITYMARKET DATAMARKET DEPTHMARKET DEVELOPMENTMARKET TURNOVERMARKET VALUEMINORITY SHAREHOLDERMINORITY SHAREHOLDER PROTECTIONSMONETARY FUNDMORAL HAZARDNATIONAL STOCK EXCHANGESNON-PERFORMING LOANSOPEN ECONOMIESOVERHEAD COSTSPOLITICAL ECONOMYPOLITICAL RISKPOOL OF FUNDSPORTFOLIOPOSITIVE COEFFICIENTPRIVATE BONDPRIVATE CREDITPRIVATE DOMESTIC DEBTPRIVATE PROPERTYPROPERTY RIGHTSPROTECTION OF INVESTORSPUBLIC MARKETREAL EXCHANGE RATEREGULATORY FRAMEWORKREMITTANCESRESERVERESERVESRISKY ASSETSRULE OF LAWSAVINGSSHARE OF ASSETSSHARE OF EQUITYSHAREHOLDERSHAREHOLDER RIGHTSSHAREHOLDERSSTOCK EXCHANGESTOCK MARKETSTOCK MARKET BUBBLESSTOCK MARKET CAPITALIZATIONSTOCK MARKET DEVELOPMENTSTOCK MARKET DEVELOPMENTSSTOCK MARKETSSTOCKSTRADE LIBERALIZATIONTRADINGTRANSPARENCYVOLATILE CAPITALWORLD FINANCIAL MARKETSWorld Bank10.1596/1813-9450-4973