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International Finance Center(Vol.8 No.1)

Economic Research Institute (Tel: 759-5407) 2005.09.05 2475

International Finance Center: Its Conditions and Effects

What fosters the establishment of an international finance center(IFC)?
Does it raise the degree of financial development? This paper examines the
conditions and effects of the IFC. In this study, a cross-country sample of
106 countries are used and 18 of them are identified as IFC nations. As
expected, the successful environment of an IFC is closely linked to the
advances in financial openness. The most important institutional factor
favorable to IFCs turns out to be the regulatory environment. An IFC will be
sustainable under freer and transparent market regulations even in nonfinancial
sectors, as well as a more open financial system. In general, the
depth of financial markets increases steadily as the real economy grows.
However, our findings show that beyond just functioning to facilitate
international financial transactions, the IFC raises further the degree of
domestic financial development.