Impacts of cross-border equity portfolio flow and central bank transparency on financial development: the role of economic freedom and international bonds

Journal article


Kwabi, F., Wonu, C., Ezeani, E., Owusu, A. and Leone, V. 2024. Impacts of cross-border equity portfolio flow and central bank transparency on financial development: the role of economic freedom and international bonds. International Journal of Finance and Economics. pp. 1-29. https://doi.org/10.1002/ijfe.2947
AuthorsKwabi, F., Wonu, C., Ezeani, E., Owusu, A. and Leone, V.
Abstract

We investigate the effects of international equity portfolio diversification and central bank independence on financial development using panel data from 49 countries from 2001 to 2016. We find that international equity portfolio diversification improves financial development. We correspondingly examine potential factors through which international equity portfolio diversification may impact financial development and find that central bank transparency provides an important channel for improving financial development. We further find that the relationship between international equity portfolio diversification and financial development is sensitive to economic freedom. Concerning sequencing, we find that foreign equity and debt flow are complementary to financial system development. Our results are robust to endogeneity using the exogenous shock of the 2008 financial crisis. This study offers new empirical evidence on the relationship between international capital and financial development.

KeywordsFinancial development; International equity portfolio diversification; Central bank transparency; Foreign debt flow; Economic freedom
Year2024
JournalInternational Journal of Finance and Economics
Journal citationpp. 1-29
PublisherWiley
ISSN1076-9307
Digital Object Identifier (DOI)https://doi.org/10.1002/ijfe.2947
Web address (URL)https://onlinelibrary.wiley.com/doi/10.1002/ijfe.2947
Accepted author manuscript
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Open
Publisher's version
License
File Access Level
Open
Output statusPublished
Publication dates
Online27 Mar 2024
Publication process dates
Accepted08 Jan 2024
Deposited27 Mar 2024
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