DOES FINANCIAL GLOBALIZATION STILL SPUR GROWTH IN DEVELOPING COUNTRIES? CONSIDERING EXCHANGE RATE VOLATILITY

Brahim Gaies, Stéphane Goutte and Khaled Guesmi

Working Papers from HAL

Abstract: This paper analyses the effects of financial globalization on growth in developing countries, focusing on its interaction with exchange rate volatility. Based on dynamic panel data models and the two-step system Generalized Method of Moments (system GMM) estimator, it replicates the method of Gaies et al. (2019a; 2019b) and extends it by exploring a new spillover effect of financial globalization in terms of exchange rate volatility measured by six different indicators. The findings show the positive influence of investment-globalization on growth through the traditional channel of capital accumulation and by reducing the negative impact of exchange rate volatility. These impacts are not ensured by indebtedness-globalization, thereby shedding light on the government's decision in developing countries on foreign capital control policy. These results are robust to changes in the estimator and variables used.

Keywords: Government Policy; Foreign Investors; Dynamic Panel; Exchange Rate Volatility; Interactions (search for similar items in EconPapers)
Date: 2019-07-05
New Economics Papers: this item is included in nep-fdg
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