FINANCIAL INTEGERATION ACROSS BORDERS: INVESTIGATING THE CONNECTEDNESS OF FINANCIAL INTEGERATION AND ECONOMIC GROWTH IN DEVELOPED VS. DEVELOPING ECONOMIES

This study examines the dynamic connections and interdependencies of financial markets across developed and emerging economies from 2010 to 2023. This study seeks to address this gap by analyzing the interconnectedness of financial markets in both developed and developing nations, employing the Granger causality test, the DCC-GARCH model, and the Diebold-Yilmaz methodology. The analysis reveals a substantial bi-directional positive correlation between the financial markets of advanced and emerging economies. The study employs the DCC GARCH approach, revealing that the connections between financial integration in established and emerging nations demonstrate significant volatility spillovers. Moreover, the t-DCC model computes volatilities and correlations unconditionally, indicating that the unconditional volatility across all markets is approximately one, denoting a significant level of integration, which leads to heightened volatility in both established and emerging markets. The Diebold and Yilmaz Connectedness test has clarified the degree of interconnectedness among various financial markets. The results indicate that while a substantial degree of correlation exists, the intensity of these relationships varies across different market circumstances and timeframes. These findings assert that financial integration significantly impacts economic growth, as demonstrated in this study. The integration of financial components into various investment portfolios may enhance risk-adjusted returns, particularly under sustainable investing paradigms.