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The impact of financial integration on poverty, entrepreneurship, and financial inclusion

Vu, Thuy Duong; (2019) The impact of financial integration on poverty, entrepreneurship, and financial inclusion. Doctoral thesis (Ph.D), UCL (University College London). Green open access

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This thesis empirically explores the impact of financial integration, defined as unrestricted movement of capital across borders, on poverty, entrepreneurship, and financial inclusion. Its main contribution is to recognize the importance of decomposing financial integration into de jure (i.e. capital account liberalization) and de facto (i.e. actual capital mobility) components, and to investigate their potentially different impacts. De facto financial integration is further divided into different types of capital flows based on asset categories (e.g. foreign direct investment, remittances). Chapter 1 provides a theoretical background for the empirical chapters, presenting the existing definitions, measures, and potential linkages between financial integration, poverty, entrepreneurship, and financial inclusion. Chapter 2 investigates the effects of financial integration on poverty in developing countries. It concludes that de jure and de facto components of financial integration have opposite effects on poverty. More specifically, the obtained results indicate that capital account liberalization has positive effect on poverty alleviation, while the opposite effect is found for foreign direct investment inflows. The influence of financial integration on opportunity- and necessity-driven nascent entrepreneurship is analysed in Chapter 3. Using multilevel multinomial modelling, it is reported that while the probability of becoming both types of nascent entrepreneurs seems to be reduced as a consequence of cross-border bank lending inflows and trade credit outflows, the probability of becoming an entrepreneur out of necessity is additionally lowered by MNEs entry and portfolio investment inflows. Foreign bank presence and trade credit inflows, on the other hand, turn out to be beneficial for both types of nascent entrepreneurs. The role of de jure financial integration is less clear as the evidence of positive impact of the overall openness index is very weak. More importantly, trade openness consistently appears to have a positive moderation effect on the financial integration relationship with nascent entrepreneurs, supporting the private interest theory of financial development by Rajan & Zingales (2003). Chapter 4 studies the effects of financial integration on financial inclusion of households and Small and Medium-sized Enterprises. Using instrumental variable approach, it is found that Multinational Enterprises entry into non-financial sector has negative impact on the financial inclusion of both households and SMEs, while the opposite emerges for de jure financial integration. Households are additionally found to benefit from foreign bank presence and remittance inflows.

Type: Thesis (Doctoral)
Qualification: Ph.D
Title: The impact of financial integration on poverty, entrepreneurship, and financial inclusion
Event: UCL (University College London)
Open access status: An open access version is available from UCL Discovery
Language: English
Additional information: Copyright © The Author 2019. Original content in this thesis is licensed under the terms of the Creative Commons Attribution 4.0 International (CC BY 4.0) Licence (https://creativecommons.org/licenses/by/4.0/). Any third-party copyright material present remains the property of its respective owner(s) and is licensed under its existing terms. Access may initially be restricted at the author’s request.
UCL classification: UCL
URI: https://discovery.ucl.ac.uk/id/eprint/10080588
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