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The economic impact of financial integration

One of the key topics in Sebnem Kalemli-Özcan’s research is financial integration — the links between financial markets through cross-border capital flows or foreign participation in domestic financial markets. Kalemli-Özcan explains how financial integration, an important part of ongoing globalization processes, leads to efficient allocation of capital and promotes investment and growth.
“If you look at emerging markets, a lot of their growth is financed with capital flows,” says the economist. “So financial integration helps developing countries tremendously.”
Still, capital flows are fickle, particularly for emerging markets. This is one among several reasons for the ongoing debate around the costs and benefits of financial integration.