We study the evolution of global economic and financial market integration in a theoreticallymotivated framework. Using firm-level cash flow forecasts, we find that while the two forms of integration have been progressing rapidly over the years, they have reversed following the global financial crisis. In the post-crisis period, emerging markets are still lagging behind developed countries in financial integration, but their level of economic integration has converged to that of developed countries. This is suggestive evidence that the driver of integration for emerging markets is economic rather than financial. While country development, as measured by GDP per capita and communications technology, as well as the world business cycle are the leading common determinants of both forms of integration, a country’s banking sector and investment profile drive, respectively, the progress of economic integration and the speed of financial integration.

Keywords: Financial Integration, Economic Integration, Cash Flow News, Discount Rate News, Analyst Forecasts

JEL Classification Number: F15, F30, G15, E44