International Finance and Growth in Developing Countries

Maurice Obstfeld

No 28029 in World Bank Publications - Books from The World Bank Group

Abstract: Despite an abundance of cross-section, panel, and event studies, there is strikingly little convincing documentation of direct positive impacts of financial opening on the economic welfare levels or growth rates of developing countries. The econometric difficulties are similar to those that bedevil the literature on trade openness and growth, though if anything, they are more severe in the context of international finance. There is also little systematic evidence that financial opening raises welfare indirectly by promoting collateral reforms of economic institutions or policies. At the same time, opening the financial account does appear to raise the frequency and severity of economic crises. Nonetheless, developing countries continue to move in the direction of further financial openness. A plausible explanation is that financial development is a concomitant of successful economic growth, and a growing financial sector in an economy open to trade cannot long be insulated from cross?border financial flows. This survey discusses the policy framework in which financial globalization is most likely to prove beneficial for developing countries. The reforms developing countries need to carry out to make their economies safe for international asset trade are the same reforms they need to carry out to curtail the power of entrenched economic interests and liberate the economy's productive potential.

Keywords: Macroeconomics; and; Economic; Growth-Economic; Theory; &; Research; Finance; and; Financial; Sector; Development-Capital; Markets; and; Capital; Flows; International; Economics; and; Trade-Capital; Flows; International; Economics; and; Trade-Globalization; and; Financial; Integration; International; Economics; and; Trade-Trade; and; Services; Macroeconomics; and; Economic; Growth-Fiscal; &; Monetary; Policy (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (27)

Downloads: (external link)
https://openknowledge.worldbank.org/bitstreams/b68 ... addd7a5a2c9/download (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbpubs:28029

Access Statistics for this book

More books in World Bank Publications - Books from The World Bank Group 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Tal Ayalon ().