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Do integrated economies grow faster? evidence from domestic equity holdings

This paper aims to investigate the impact of financial integration on economic growth. Home bias, which is the tendency of over-investing in domestic stock bourse, is proposed as a proxy of advanced financial integration. The persistence of home bias reflects the existence of international friction....

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Main Authors: Lee, Pei Ling, Chin, Lee, Law, Siong Hook, Saini, Azman
Format: Article
Language:English
Published: Economics Bulletin 2017
Online Access:http://psasir.upm.edu.my/id/eprint/61511/1/Do%20integrated%20economies%20grow%20faster%20evidence%20from%20domestic%20equity%20holdings.pdf
http://psasir.upm.edu.my/id/eprint/61511/
http://www.accessecon.com/pubs/eb/default.aspx?topic=Abstract&PaperID=EB-17-00557
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spelling my.upm.eprints.615112022-03-30T04:41:54Z http://psasir.upm.edu.my/id/eprint/61511/ Do integrated economies grow faster? evidence from domestic equity holdings Lee, Pei Ling Chin, Lee Law, Siong Hook Saini, Azman This paper aims to investigate the impact of financial integration on economic growth. Home bias, which is the tendency of over-investing in domestic stock bourse, is proposed as a proxy of advanced financial integration. The persistence of home bias reflects the existence of international friction. A high degree of home bias reflects imperfect integration of the national stock market with world capital markets and suggests a slower pace of economic expansion. Home bias is utilised, through its own lags, to address the reverse causality implied by potential endogeneity between home bias and real GDP growth. A dynamic GMM approach is employed to address the endogeneity and serial correlation concern. The results indicate the lagged real GDP per capita growth, home bias, government consumption, and variability in real effective exchange rates are found to explain cross-country variation in growth. Economics Bulletin 2017 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/61511/1/Do%20integrated%20economies%20grow%20faster%20evidence%20from%20domestic%20equity%20holdings.pdf Lee, Pei Ling and Chin, Lee and Law, Siong Hook and Saini, Azman (2017) Do integrated economies grow faster? evidence from domestic equity holdings. Economics Bulletin, 37 (4). 2905 - 2916. ISSN 1545-2921 http://www.accessecon.com/pubs/eb/default.aspx?topic=Abstract&PaperID=EB-17-00557
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
description This paper aims to investigate the impact of financial integration on economic growth. Home bias, which is the tendency of over-investing in domestic stock bourse, is proposed as a proxy of advanced financial integration. The persistence of home bias reflects the existence of international friction. A high degree of home bias reflects imperfect integration of the national stock market with world capital markets and suggests a slower pace of economic expansion. Home bias is utilised, through its own lags, to address the reverse causality implied by potential endogeneity between home bias and real GDP growth. A dynamic GMM approach is employed to address the endogeneity and serial correlation concern. The results indicate the lagged real GDP per capita growth, home bias, government consumption, and variability in real effective exchange rates are found to explain cross-country variation in growth.
format Article
author Lee, Pei Ling
Chin, Lee
Law, Siong Hook
Saini, Azman
spellingShingle Lee, Pei Ling
Chin, Lee
Law, Siong Hook
Saini, Azman
Do integrated economies grow faster? evidence from domestic equity holdings
author_facet Lee, Pei Ling
Chin, Lee
Law, Siong Hook
Saini, Azman
author_sort Lee, Pei Ling
title Do integrated economies grow faster? evidence from domestic equity holdings
title_short Do integrated economies grow faster? evidence from domestic equity holdings
title_full Do integrated economies grow faster? evidence from domestic equity holdings
title_fullStr Do integrated economies grow faster? evidence from domestic equity holdings
title_full_unstemmed Do integrated economies grow faster? evidence from domestic equity holdings
title_sort do integrated economies grow faster? evidence from domestic equity holdings
publisher Economics Bulletin
publishDate 2017
url http://psasir.upm.edu.my/id/eprint/61511/1/Do%20integrated%20economies%20grow%20faster%20evidence%20from%20domestic%20equity%20holdings.pdf
http://psasir.upm.edu.my/id/eprint/61511/
http://www.accessecon.com/pubs/eb/default.aspx?topic=Abstract&PaperID=EB-17-00557
_version_ 1729704993036959744
score 13.211869

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