Financial Globalization: Unequal Blessings

20 Pages Posted: 29 Nov 2002

See all articles by Augusto de la Torre

Augusto de la Torre

Columbia University, School of International & Public Affairs (SIPA), Students

Eduardo Levy Levy-Yeyati

Universidad Torcuato Di Tella - School of Business

Sergio L. Schmukler

World Bank - Development Research Group (DECRG)

Multiple version iconThere are 2 versions of this paper

Date Written: October 7, 2002

Abstract

This paper presents a framework to analyze financial globalization. It argues that financial globalization needs to take into account the relation between money (particularly in its role as store of value), asset and factor price flexibility, and contractual and regulatory institutions. Countries that have the 'blessed trinity' (international currency, flexible exchange rate regime, and sound contractual and regulatory environment) can integrate successfully into the (imperfect) world financial markets. But developing countries normally display the 'unblessed trinity' (weak currency, fear of floating, and weak institutional framework). The paper defines and discusses two alternative avenues (a 'dollar trinity' and a 'peso trinity') for developing countries to safely embrace international financial integration while the blessed trinity remains beyond reach.

Keywords: financial globalization, dollarization, floating, currency regime, financial crises, emerging markets

JEL Classification: F30, F31, F33, G20, G28

Suggested Citation

de la Torre, Augusto and Levy-Yeyati, Eduardo Levy and Schmukler, Sergio, Financial Globalization: Unequal Blessings (October 7, 2002). World Bank Policy Research Working Paper No. 2903. Available at SSRN: https://ssrn.com/abstract=340600 or http://dx.doi.org/10.2139/ssrn.340600

Augusto De la Torre

Columbia University, School of International & Public Affairs (SIPA), Students ( email )

420 West 118th Street
New York, NY
United States

Eduardo Levy Levy-Yeyati

Universidad Torcuato Di Tella - School of Business ( email )

Saenz Valiente 1010
C1428BIJ Buenos Aires
Argentina

Sergio Schmukler (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN MC 3-301
Washington, DC 20433
United States
202-458-4167 (Phone)
202-522-3518 (Fax)

HOME PAGE: http://www.worldbank.org/en/about/people/s/sergio-schmukler

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