The threshold consumption correlation-based approach to international capital mobility: Evidence from advanced and developing countries

Using the consumption correlation-based criterion, this paper analyzes international capital mobility for both advanced and developing countries. We provide evidence that global capital markets are imperfectly integrated for both advanced and developing countries. However, a clear difference between these groups of countries emerges when their consumption growth has stagnated; in developing countries at such times, the opportunity to smooth their consumption drops dramatically.

► According to the consumption correlation criterion, global capital markets are imperfectly integrated.
► Advanced countries can access at any time both domestic and foreign capital markets to smooth their consumption.
► Developing countries seem to have problems with accessing capital markets when their economy becomes fragile.