This paper argues that the cross-market premium (the ratio between domestic and international prices of cross-listed stocks) provides a valuable measure of international financial integration. Applying Threshold Autoregressive (TAR) models, we find evidence of narrow non-arbitrage bands and rapid price convergence. Moreover, we find that integration increases with stock liquidity, that capital controls segment markets, and that crises are associated with higher volatility, not weaker integration

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This paper addresses the impact of international financial integration. If firms can borrow from domestic and foreign lenders, domestic loans act as collateral to foreign lenders. However, integration raises competition and this reduces domestic lenders profits. Then if domestic lenders cannot face foreign competition, then domestic and foreign lenders capital supplies shrink and the economy falls in a credit crunch situation.

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This paper provides a quantitative explanation of the Backus-Smith puzzle (negative correlation consumption-real exchange rate).To account for this anomaly, the paper develops a model with signals about future productivity shocks.The logic is that current positive signals generate a higher expected wealth, therefore, agents increase their consumption without necessarily a higher output in that period and this gap leads to an appreciation

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In this paper we test whether stock market volatility in six emerging economies has changed significantly over the period 1976:01-2002:03. We use outlier detection methodologies as starting point of the analysis and as a filtering device. Our analysis suggests, first, that outlier detection may be a useful first step for volatility breakpoint analyis, and, second, that changes in volatility behavior, while indeed present, may have been overstated in the past.

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