TY  - JOUR
AU  - Bayoumi,Tamim
AU  - Klein,Michael W.
TI  - A Provincial View of Capital Mobility
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5115
PY  - 1995
Y2  - May 1995
UR  - http://www.nber.org/papers/w5115
L1  - http://www.nber.org/papers/w5115.pdf
N1  - Author contact info:
Tamim Bayoumi
International Monetary Fund
700 19th Street NW
Washington, DC 20431
E-Mail: tbayoumi@imf.org

Michael W. Klein
Fletcher School
Tufts University
Medford, MA 02155
Tel: (617) 627-2718
Fax: (617) 627-3712
E-Mail: michael.klein@tufts.edu
AB  - This paper develops a method of testing for zones of financial integration based upon intertemporal considerations and applies it to data on Canadian provincial trade.  In a financially-integrated region individuals smooth consumption with respect to movements in aggregate income.  Consumption in that region follows income in that region if individuals use only regional capital markets while consumption follows movements in income in broader regions (e.g. national income or world income) if individuals have access to and use capital markets in those broader regions (e.g. the national or global capital markets, respectively).  We derive a specification which measures the impact of differential levels of access to capital markets--different zones of capital mobility--on the relationship between the regional trade balance and regional, national and global income.  This empirical specification is tested using data on trade balances across Canadian provinces.  The results indicate full capital mobility within Canada but only partial capital mobility between Canada and the rest of the world.
ER  -