Effects of Financial Globalization on Developing Countries: Some Empirical Evidence

Ayhan Kose, Kenneth Rogoff, Eswar Prasad and Shang-Jin Wei

No 2003/007, IMF Occasional Papers from International Monetary Fund

Abstract: This study provides a candid, systematic, and critical review of recent evidence on this complex subject. Based on a review of the literature and some new empirical evidence, it finds that (1) in spite of an apparently strong theoretical presumption, it is difficult to detect a strong and robust causal relationship between financial integration and economic growth; (2) contrary to theoretical predictions, financial integration appears to be associated with increases in consumption volatility (both in absolute terms and relative to income volatility) in many developing countries; and (3) there appear to be threshold effects in both of these relationships, which may be related to absorptive capacity. Some recent evidence suggests that sound macroeconomic frameworks and, in particular, good governance are both quantitatively and qualitatively important in affecting developing countries’ experiences with financial globalization.

Keywords: OP; economy; MFI economy; country; capital; LFI economy; consumption volatility; FDI flow; financial globalization; FDI recipient country; Financial integration; Capital flows; Consumption; Foreign direct investment; Global; East Asia; Sub-Saharan Africa; Africa; Asia and Pacific (search for similar items in EconPapers)
Pages: 64
Date: 2003-09-03
References: Add references at CitEc
Citations: View citations in EconPapers (520)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=16428 (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:imf:imfops:2003/007

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Occasional Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().