FINANCIAL DIMENSION OF GLOBAL ECONOMIC INTEGRATION AND ASSESSMENT OF THE INSTITUTIONAL ENVIRONMENT

Abstract

The study reveals the financial dimension of global economic integration in the context of global changes and fragmentation of the institutional environment. It is argued that global economic integration is a multi-level and open system, therefore it is vulnerable to challenges and threats. The main challenges and threats are systematised. The role of financial factors in integration processes is substantiated. The financial dimension of global economic integration is revealed and three interrelated structural elements are proposed: financial openness, financial integration, and financial globalisation. Existing approaches to understanding the essence and role of financial globalisation have been analysed, which has made it possible to formulate the author's understanding of this concept. It is argued that financial openness reflects the institutional conditions of capital movement and characterises the financial environment. The importance of using the Chinn–Ito Index (KAOPEN) for its assessment is emphasised. Countries are classified according to this index, which confirmed significant asymmetries between them. It has been established that countries with developed economies have liberal institutional regimes for regulating capital movements and minimal formal financial restrictions. A large group of countries has been identified in which strict mechanisms for controlling financial flows remain in place. Indicators have been proposed that make it possible to assess financial integration in actual terms (de facto). The following arguments are presented for the risks to global financial stability: firstly, investors' underestimation of potential risks; secondly, structural changes in currency markets and debt burdens; and thirdly, increased activity by non-bank financial intermediaries. An analysis is conducted of trends in global investment activity. Particular emphasis is placed on the problem of inequality in the institutional environment of globally integrated countries. The institutional and economic conditions of global integration of countries are analysed. Indicators of the institutional block are formed. The correlation analysis method is used to construct a correlation matrix and identify linear relationships between indicators. A visual assessment of the distribution of variables is performed using histograms. The objective of the present study was to divide countries into groups. To this end, a multidimensional analysis method was used to determine the weighted average of indicators. The results of the calculations were used to identify four quartiles of countries, and the characteristics of each group of countries were substantiated from the perspective of their involvement in global integration processes. The heterogeneity of institutional and economic conditions for integration was confirmed. It is imperative to acknowledge the necessity to enhance the institutional framework of nations in order to facilitate their effective participation in global integration processes, with a particular focus on the components of the financial dimension.