Measuring Financial Integration: More Data, More Countries, More Expectations

Menzie D. Chinn; Hiro Ito

doi:10.3386/w31505

Measuring Financial Integration: More Data, More Countries, More Expectations

Menzie D. Chinn & Hiro Ito

Working Paper 31505

DOI 10.3386/w31505

Issue Date July 2023

We assess market mediated financial integration over the last fifty years. We first systematically lay out several definitions of financial integration, and then review the evidence regarding whether covered interest parity, uncovered interest parity, and real interest parity hold across industrial and non-industrial countries. Finally we examine what the determinants of real interest differentials are.

Chapter prepared for Handbook of Financial Integration, edited by Guglielmo Maria Caporale. We thank an anonymous referee and Jeffrey Frankel for helpful comments. Chinn and Ito acknowledge the financial support of faculty research funds of the University of Wisconsin and Portland State University, respectively The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
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Measuring Financial Integration: More Data, More Countries, More Expectations

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