| By: |
Kenneth Rogoff;
M. Ayhan Kose;
Eswar Prasad;
Shang-Jin Wei |
| Abstract: |
The literature on the benefits and costs of financial globalization for
developing countries has exploded in recent years, but along many disparate
channels and with a variety of apparently conflicting results. For instance,
there is still little robust evidence of the growth benefits of broad capital
account liberalization, but a number of recent papers in the finance
literature report that equity market liberalizations do significantly boost
growth. Similarly, evidence based on microeconomic (firm- or industry-level)
data shows some benefits of financial integration and the distortionary
effects of capital controls, while the macroeconomic evidence remains
inconclusive. We attempt to provide a unified conceptual framework for
organizing this vast and growing literature. This framework allows us to
provide a fresh synthetic perspective on the macroeconomic effects of
financial globalization, in terms of both growth and volatility. Overall, our
critical reading of the recent empirical literature is that it lends some
qualified support to the view that developing countries can benefit from
financial globalization, but with many nuances. On the other hand, there is
little systematic evidence to support widely cited claims that financial
globalization by itself leads to deeper and more costly developing country
growth crises. |
| Keywords: |
Capital account liberalization , financial integration , growth and volatility , financial crises , developing countries , Globalization , Capital account liberalization , Financial crisis , Developing countries , |
| Date: |
2006–08–21 |
| URL: |
http://d.repec.org/n?u=RePEc:imf:imfwpa:06/189&r=fdg |