The Elusive Gains from International Financial Integration

Olivier Jeanne and Pierre-Olivier Gourinchas

No 3902, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Standard theoretical arguments tell us that countries with relatively little capital benefit from financial integration as foreign capital flows in and speeds up the process of convergence. We show in a calibrated neoclassical model that conventionally measured welfare gains from this type of convergence appear relatively limited for the typical emerging country. The welfare gain from switching from financial autarky to perfect capital mobility is roughly equivalent to a 1% permanent increase in domestic consumption for the typical emerging economy. This is negligible relative to the potential welfare gain of a take-off in domestic productivity of the magnitude observed in some countries.

Keywords: International financial integration; Capital flows; Development accounting; Convergence (search for similar items in EconPapers)
JEL-codes: F02 F20 (search for similar items in EconPapers)
Date: 2003-05
New Economics Papers: this item is included in nep-dge
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Citations: View citations in EconPapers (66)

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Related works:
Journal Article: The Elusive Gains from International Financial Integration (2006)
Working Paper: The Elusive Gains from International Financial Integration (2004)
Working Paper: The Elusive Gains from International Financial Integration (2003)
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