The Evidence And Impact Of Financial Globalization

The sharp realities of financial globalization become clear during crises, when winners and losers emerge. Crises usher in short- and long-term changes to the status quo, and everyone agrees that learning from crises is a top priority. The Evidence and Impact of Financial Globalization devotes separate articles to specific crises, the conditions that cause them, and the longstanding arrangements devised to address them. While other books and journal articles treat these subjects in isolation, this volume presents a wide-ranging, consistent, yet varied specificity. Substantial, authoritative, and useful, these articles provide material unavailable elsewhere. Substantial articles by top scholars sets this volume apart from other information sources Rapidly developing subjects will interest readers well into the future Reader demand and lack of competitors underline the high value of these reference works

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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.

These three volumes present the full complexity of the history, practices, and outlook of 21st century global financial integration. The Handbook of Key Global Financial Markets, Institutions, and Infrastructure explores the growth of markets, intermediaries, rights, practices, and standards worldwide. The Evidence and Impact of Financial Globalization devotes separate articles to specific crises, the conditions that cause them, and the longstanding arrangements devised to address them. The Handbook of Safeguarding Global Financial Stability examines our political economy, particularly the ways in which formal and informal policies as well as financial theories and technical models inhabit our institutions, strategies, and tactics. For those seeking substantial, authoritative descriptions and summaries, these volumes will replace books, journals, and other information sources with a coherent, easy-to-use reference work. Reveals and analyzes examples of financial integration in both triumph and crisis Features international perspectives on strategies and tactics for resolving crises Concentrates on economic and financial topics without introducing broader cultural subjects

Financial globalization has increased dramatically over the past three decades, particularly for advanced economies, while emerging market and developing countries experienced more moderate increases. Divergences across countries stem from different capital control regimes, and factors such as institutional quality and domestic financial development. Although, in principle, financial globalization should enhance international risk sharing, reduce macroeconomic volatility, and foster economic growth, in practice its effects are less clear-cut. This paper envisages a gradual and orderly sequencing of external financial liberalization and complementary reforms in macroeconomic policy framework as essential components of a successful liberalization strategy.

We take a fresh look at the aggregate and distributional effects of policies to liberalize international capital flows—financial globalization. Both country- and industry-level results suggest that such policies have led on average to limited output gains while contributing to significant increases in inequality—that is, they pose an equity–efficiency trade-off. Behind this average lies considerable heterogeneity in effects depending on country characteristics. Liberalization increases output in countries with high financial depth and those that avoid financial crises, while distributional effects are more pronounced in countries with low financial depth and inclusion and where liberalization is followed by a crisis. Difference-indifference estimates using sectoral data suggest that liberalization episodes reduce the share of labor income, particularly for industries with higher external financial dependence, those with a higher natural propensity to use layoffs to adjust to idiosyncratic shocks, and those with a higher elasticity of substitution between capital and labor. The sectoral results underpin a causal interpretation of the findings using macro data.

This publication gathers together articles, that have appeared in Finance & Development over the past eight years, which dealt with the inplications of, and responses to, globalization. The focus is on financial globalization, including the policy implications of the huge growth in cross-border capital flows.

Reviews the available evidence and previous research on potential effects of financial globalization, that is, the international integration of financial markets. Central banks with floating currencies retain the ability to independently determine short-term interest rates and thus influence broader financial conditions and macro-economic performance in their economies. However, domestic financial conditions appear to have become more vulnerable to a wide range of external shocks, complicating the task of making appropriate monetary policy decisions. Moreover, the financial crisis has highlighted the importance of cross-border channels for the transmission of liquidity and credit shocks. Charts and tables. This is a print on demand report.