In some research studies (i.e. Agenor, 2001) the FDI inflows as a percentage of GDP was used as a proxy variable for de facto measurement of the effects of the country’s level of international financial integration. What do you think about that?
Better chech the domestic S-I correlation and then have a look in the Feldstein - Horioka puzzle literature.
Dear Prof,
You mean that Feldstein-Horioka coefficient can be more suitable than FDI and let say IFI ( foreign assets and foreign liabilities divided by GDP ) for measurement of international financial integration in some countries
Dear Doctor
If you find reference in recent literature then you may use the similar one in your research.
International financial integration is how connected one's financial markets are to the world financial markets (capital and money markets). Financial flows is one measurement - as you mention using foreign assets and foreign liabilities from BOP statistics. Other measures can be how domestic financial prices relate to world financial markets in terms of stock prices, interest rates and exchange rates.
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