Financial Globalization: A Reappraisal

93 Pages Posted: 16 Nov 2006

See all articles by M. Ayhan Kose

M. Ayhan Kose

World Bank; Brookings Institution; Centre for Economic Policy Research (CEPR); Australian National University (ANU)

Eswar S. Prasad

Cornell University - Dyson School of Applied Economics and Management; Cornell University - Department of Economics; Brookings Institution; NBER; IZA Institute of Labor Economics; Cornell SC Johnson College of Business

Kenneth Rogoff

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Shang-Jin Wei

Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: September 2006

Abstract

The literature on the benefits and costs of financial globalization for developing countries has exploded in recent years, but along many disparate channels with a variety of apparently conflicting results. 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, both in terms of 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

JEL Classification: F02, F21, F36, F4

Suggested Citation

Kose, M. Ayhan and Prasad, Eswar S. and Rogoff, Kenneth S. and Wei, Shang-Jin, Financial Globalization: A Reappraisal (September 2006). CEPR Discussion Paper No. 5842, Available at SSRN: https://ssrn.com/abstract=945420

M. Ayhan Kose

World Bank ( email )

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Brookings Institution ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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Australian National University (ANU) ( email )

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Australia

Eswar S. Prasad

Cornell University - Dyson School of Applied Economics and Management ( email )

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HOME PAGE: http://prasad.aem.cornell.edu

Cornell University - Department of Economics ( email )

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Brookings Institution ( email )

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NBER ( email )

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IZA Institute of Labor Economics

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Cornell SC Johnson College of Business ( email )

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Kenneth S. Rogoff

Harvard University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Shang-Jin Wei (Contact Author)

Columbia University - Columbia Business School, Finance ( email )

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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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United Kingdom

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