Rethinking the effects of financial globalization

Fernando Broner and Jaume Ventura ()
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Jaume Ventura: https://www.upf.edu/web/econ/faculty/-/asset_publisher/6aWmmXf28uXT/persona/id/3418977

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: During the last few decades, many emerging markets lifted restrictions on cross-border financial transactions. In this paper, we present a simple model that can account for the observed effects of financial globalization. The model emphasizes the role of imperfect enforcement of domestic debts and the interactions between domestic and foreign debts. Financial globalization can lead to a variety of outcomes: (i) domestic capital flight and ambiguous effects on net capital flows, investment, and growth; (ii) capital inflows and higher investment and growth; or (iii) volatile capital flows and unstable domestic financial markets. The model shows how the effects of financial globalization depend on the level of development, productivity, domestic savings, and the quality of institutions.

Keywords: financial globalization; sovereign risk; enforcement; capital flows; economic growth. (search for similar items in EconPapers)
JEL-codes: F34 F36 F43 G15 O19 O43 (search for similar items in EconPapers)
Date: 2010-10, Revised 2015-10
New Economics Papers: this item is included in nep-cba
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Citations: View citations in EconPapers (32)

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Journal Article: Rethinking the Effects of Financial Globalization (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1128

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