Essays on international financial integration

This dissertation studies the effects of international financial integration. The research shows that because of growing international trade as well as financial integration the probability of a joint crash of international stock markets has strongly increased. This makes effective international stock diversification more difficult. Results from study into the investors’ true stock positions show that investors do not move out of markets that jointly crash with their domestic market. Surprisingly enough, they do move out of those markets that jointly boom with their domestic market. Another effect of international financial integration is that value changes in private properties have effect on the trade balance. A value increase of, for example, the house, leads to an increase in consumption. When foreign acquisitions rise, there is an increasing import of goods and services. This explains, for example, the trade deficits in the United Kingdom and the United States. Finally, the dissertation shows how migrant remittances to their family in the home country positively influence the financial policy of the migrant’s home country.