FINANCIAL INTEGERATION ACROSS BORDERS: INVESTIGATING THE CONNECTEDNESS OF FINANCIAL INTEGERATION AND ECONOMIC GROWTH IN DEVELOPED VS. DEVELOPING ECONOMIES
DOI:
https://doi.org/10.18623/rvd.v23.n3.4363Palabras clave:
Financial Integration, Economic Growth, DCC GARCH, Diebold and Yilmaz Connectedness TestResumen
This study examines the dynamic connections and interdependencies of financial markets across developed and emerging economies from 2010 to 2023. This study seeks to address this gap by analyzing the interconnectedness of financial markets in both developed and developing nations, employing the Granger causality test, the DCC-GARCH model, and the Diebold-Yilmaz methodology. The analysis reveals a substantial bi-directional positive correlation between the financial markets of advanced and emerging economies. The study employs the DCC GARCH approach, revealing that the connections between financial integration in established and emerging nations demonstrate significant volatility spillovers. Moreover, the t-DCC model computes volatilities and correlations unconditionally, indicating that the unconditional volatility across all markets is approximately one, denoting a significant level of integration, which leads to heightened volatility in both established and emerging markets. The Diebold and Yilmaz Connectedness test has clarified the degree of interconnectedness among various financial markets. The results indicate that while a substantial degree of correlation exists, the intensity of these relationships varies across different market circumstances and timeframes. These findings assert that financial integration significantly impacts economic growth, as demonstrated in this study. The integration of financial components into various investment portfolios may enhance risk-adjusted returns, particularly under sustainable investing paradigms.
Citas
Adisa, R. A., & Oyamakin, S. O. (2024). Effects of Socio-Demographic and Economic Factors on Effective Implementation of the Africa Agenda in Nigeria. International Journal of Research and Innovation in Applied Science, 9(2), 193-203.
Afuecheta, E., Okorie, I. E., Nadarajah, S., & Nzeribe, G. E. (2024). Forecasting value at risk and expected shortfall of foreign exchange rate volatility of major African currencies via garch and dynamic conditional correlation analysis. Computational Economics, 63(1), 271-304.
Afzal, F., Haiying, P., Afzal, F., Mahmood, A., & Ikram, A. (2021). Value-at-risk analysis for measuring stochastic volatility of stock returns: using GARCH-based dynamic conditional correlation model. Sage Open, 11(1), 21582440211005758.
Akbari, A., Ng, L., & Solnik, B. (2021). Drivers of economic and financial integration: A machine learning approach. Journal of Empirical Finance, 61, 82-102.
Bachelet, M. J., Becchetti, L., & Manfredonia, S. (2019). The green bonds premium puzzle: The role of issuer characteristics and third-party verification. Sustainability, 11(4), 1098.
Chen, S., & Gong, B. (2021). Response and adaptation of agriculture to climate change: Evidence from China. Journal of Development Economics, 148, 102557.
Dada, J. T., Abanikanda, E. O., Tabash, M. I., Ray, S., & Al-Faryan, M. A. S. (2025). Financial globalization and macroeconomic volatility in sub-saharan african countries: Do economic and political institutions matter? Journal of Financial Economic Policy.
Demirg¨ucc-Kunt, A., & Levine, R. (2011). Bank-based and market-based financial systems: Cross-country comparisons. Financial structure and economic growth: A cross-country comparison of banks, markets, and development, 81-140.
Diebold, F. X., & Yilmaz, K. (2012). Better to give than to receive: Predictive directional measurement of volatility spillovers. International Journal of forecasting, 28(1), 57-66.
Ding, Y. (2023). Does natural resources cause sustainable financial development or resources curse? Evidence from group of seven economies. Resources Policy, 81, 103313.
Elgin, C. (2025). Anticipatory macroeconomic governance: Exploring future-oriented strategies for economic resilience and sustainability. European Journal of Futures Research, 13(1), 4.
Fernández-Rodríguez, F., & Sosvilla-Rivero, S. (2020). Volatility transmission between stock and foreign exchange markets: a connectedness analysis. Applied Economics, 52(19), 2096-2108.
Goldsmith, R. W. (1969). Financial structure and development.
Huang, W., Goodell, J. W., & Goyal, A. (2021). In times of crisis does ownership matter? Liquidity extraction through dividends during the 2007–2009 financial crisis. Journal of International Financial Markets, Institutions and Money, 73, 101380.
Lane, P. R. (2023). THE EURO AREA HIKING CYCLE: AN INTERIM ASSESSMENT: DOW LECTURE BY PHILIP R. LANE, MEMBER OF THE EXECUTIVE BOARD OF THE ECB, AT THE NATIONAL INSTITUTE OF ECONOMIC AND SOCIAL RESEARCH, LONDON, 16 FEBRUARY 2023. National Institute Economic Review, 1-31.
Li, M., & Zhu, C. (2024). The Impact of Accidental Shocks on Asset Prices from the Perspective of Financial Industry Opening. Theoretical Economics Letters, 14(4), 1455-1477.
Liaw, K. T. (2020). Survey of green bond pricing and investment performance. Journal of Risk and Financial Management, 13(9), 193.
Liu, J., Liu, M., Chai, Z., Li, C., Wang, Y., Shen, M., ... & Zhang, L. (2023). Projected rapid growth in diabetes disease burden and economic burden in China: a spatio-temporal study from 2020 to 2030. The Lancet Regional Health–Western Pacific, 33.
Markowitz, H. (1952). Modern portfolio theory. Journal of Finance, 7(11), 77-91.
Marquetti, A., Miebach, A., Morrone, H., & Leite, S. V. (2025). Investigating the dynamics of the profit rate, the exchange rate, and terms of trade in brazil. PSL Quarterly Review, 78(312), 95–114.
Monterroso, O., & Vilán, D. (2025). Commodity terms of trade uncertainty and economic activity in emerging economies. Washington: Board of Governors of the Federal Reserve System.
Murty, S., Victor, V., & Fekete-Farkas, M. (2022). Is bitcoin a safe haven for Indian investors? A GARCH volatility analysis. Journal of Risk and Financial Management, 15(7), 317.
Nguyen, C. V. (2025). The Role of Economic Integration Policies in Increasing Economic Growth in Selected Southeast Asian Countries. Journal of Risk and Financial Management, 18(5), 229.
Nguyen, N. T., Nguyen, M. T. N., Do, T. T. H., Le, T. Q., & Nguyen, N. H. U. (2024). Hedging Carbon Price Risk on EU ETS: A Comparison of Green Bonds from the EU, US, and China. Sustainability, 16(14), 5886.
Patra, S., & Panda, P. (2021). Spillovers and financial integration in emerging markets: Analysis of BRICS economies within a VAR-BEKK framework. International Journal of Finance & Economics, 26(1), 493-514.
Patra, S., & Panda, P. (2021). Spillovers and financial integration in emerging markets: Analysis of BRICS economies within a VAR-BEKK framework. International Journal of Finance & Economics, 26(1), 493-514.
Pham, L. (2016). Is it risky to go green? A volatility analysis of the green bond market. Journal of Sustainable Finance & Investment, 6(4), 263-291.
Reboredo, J. C. (2018). Green bond and financial markets: Co-movement, diversification and price spillover effects. Energy Economics, 74, 38-50.
Reboredo, J. C. (2018). Green bond and financial markets: Co-movement, diversification and price spillover effects. Energy Economics, 74, 38-50.
Rojo-Suárez, J., & Alonso-Conde, A. B. (2020). Impact of consumer confidence on the expected returns of the Tokyo Stock Exchange: A comparative analysis of consumption and production-based asset pricing models. PloS One, 15(11), e0241318.
Saravade, V., & Weber, O. (2020). An institutional pressure and adaptive capacity framework for green bonds: insights from India’s emerging green bond market. World, 1(3), 239-263.
Schumpeter, J. A. (1934). The theory of economic development. Cambridge. MA: Harvard.
Shaheen, R. (2025). Labor market consequence of exports diversification and terms of trade shocks in EMDEs. International Economics and Economic Policy, 22(1), 14.
Shahzad, U., & Miao, C. (2025). Growth in motion: The effects of terms of trade components, labor, capital, and investment on US economic performance. Discover Sustainability, 6(1), 381.
Sharpe, W. F. (1964). Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. The Journal of Finance, 19(3), 425–442.
Taghizadeh-Hesary, F., Yoshino, N., Inagaki, Y., & Morgan, P. J. (2021). Analyzing the factors influencing the demand and supply of solar modules in Japan–Does financing matter. International Review of Economics & Finance, 74, 1-12.
Tajgardoon, G., Behname, M., & Noormohamadi, K. (2013). Banking and Economic Growth: Evidence from Asia. Journal of Modern Accounting and Auditing, 9(4), 542.
Tomczak, K. (2024). Sovereign Green Bond Market: Drivers of Yields and Liquidity. International Journal of Financial Studies, 12(2), 48.
Wu, H. (2023). Evaluating the role of renewable energy investment resources an green finance on the economic performance: Evidence from OECD economies Resources Policy, 80, 103149.
Yildirim, R., Asadov, A., Aloui, C., & Mejri, S. (2025). Global Risk Factors and the Time-Varying Connectedness Between Clean and Dirty Cryptocurrencies. Borsa Istanbul Review.
Zarrouk, H., Zarrouk, H., El Ghak, T., El Ghak, T., Abu Al Haija, E., & Abu Al Haija, E. (2017). Financial development, Islamic finance and economic growth: evidence of the UAE. Journal of Islamic Accounting and Business Research, 8(1), 2-22.
Zhou, M., & Li, X. (2022). Influence of green finance and renewable energy resources over the sustainable development goal of clean energy in China. Resources Policy, 78, 102816.
Zou, S., & Zhang, T. (2022). Correlation and dynamic volatility spillover between Green investing market, coal market, and CO2 emissions: evidence from shenzhen carbon market in China. Advances in Civil Engineering, 2022(1), 7523563.
Descargas
Publicado
Cómo citar
Número
Sección
Licencia
I (we) submit this article which is original and unpublished, of my (our) own authorship, to the evaluation of the Veredas do Direito Journal, and agree that the related copyrights will become exclusive property of the Journal, being prohibited any partial or total copy in any other part or other printed or online communication vehicle dissociated from the Veredas do Direito Journal, without the necessary and prior authorization that should be requested in writing to Editor in Chief. I (we) also declare that there is no conflict of interest between the articles theme, the author (s) and enterprises, institutions or individuals.
I (we) recognize that the Veredas do Direito Journal is licensed under a CREATIVE COMMONS LICENSE.
Licença Creative Commons Attribution 3.0
