Review the data presented in Figures 12-5 and Figure 12-7. From Figure 12-5, panel (b), what do you observe about the volume of financial transactions in developing countries relative to those in advanced countries and emerging markets since 1990? Drawing on the information presented in these figures, why is this the case? Can we attribute these patterns to financial openness or to institutions?

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Figure 12-5: (a) Increase in Financial Openness Index 100% (%) 80 60 40 20 0 1970 Advanced countries Emerging markets Developing countries 1980 1990 2000 2010 Foreign 700% 600 500 assets and (b) Increase in Financial Transactions liabilities (% of GDP) 400 300 200 100 0 1970 Developing countries 1980 Advanced countries Emerging markets Feenstra/Taylor, International Economics, 5e © 2021 Worth Publishers 1990 2000 2010