Financial Integration and Growth in a Risky World

Nicolas Coeurdacier, Helene Rey and Pablo Winant
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Pablo Winant: Bank of England - Bank of England

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Abstract: We revisit the debate on the benefits of financial integration in a two-country neoclassical growth model with aggregate uncertainty. The framework accounts simultaneously for gains from a more efficient capital allocation and gains from risk sharing—together with their interaction. Global numerical methods allow for meaningful welfare comparisons. Gains from integration are quantitatively small, even for riskier and capital scarce emerging economies. These countries import capital for efficiency reasons before exporting it for self-insurance, leading to capital flows and growth reversals along the transition. This opens the door to richer empirical implications than previously considered in the literature.

Keywords: Financial integration; Capital flows; Risky steady-state; Global solutions (search for similar items in EconPapers)
Date: 2020-06
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03799686
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Citations: View citations in EconPapers (7)

Published in Journal of Monetary Economics, 2020, 112 (.), pp.1-21. ⟨10.1016/j.jmoneco.2019.01.022⟩

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Related works:
Journal Article: Financial integration and growth in a risky world (2020)
Working Paper: Financial Integration and Growth in a Risky World (2020)
Working Paper: Financial Integration and Growth in a Risky World (2015)
Working Paper: Financial Integration and Growth in a Risky World (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03799686

DOI: 10.1016/j.jmoneco.2019.01.022

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