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Financial globalization: a macroeconomic angle

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  • Dilip K. Das
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    Abstract

    Purpose – The objective of this paper is to provide a macroeconomic assessment of the impact of global financial integration over the economies that are undergoing financial integration. Design/methodology/approach – The paper focuses on several issues. It begins with examining the evidence whether financial globalization elevates growth performance of the integrating economy and supports it macroeconomic stability. It takes a nuanced view and divides the impact of financial integration into direct and indirect benefits. Second, it scrutinizes whether there are some threshold conditions, that is, in their presence and with their support, financial globalization underpins growth and stability of the capital importing economy and in their absence it cannot. Third, it delves into the oft-cited allegation of financial globalization being a source of macroeconomic volatility and eventually financial crises. Fourth, as the evidence that emerged regarding ability of financial globalization to underpin growth was unambiguous. Policy mandarins' options are examined. Findings – The paper finds that from a theoretical perspective, it is easy to state that integration of financial markets an potentially faster growth. Whether it happens in reality is a different matter. Originality/value – The paper explores a new theme. While there are many relevant themes in financial globalization, the author has not seen any article on this theme and this paper may well be the first.

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    Bibliographic Info

    Article provided by Emerald Group Publishing in its journal Journal of Financial Economic Policy.

    Volume (Year): 2 (2010)
    Issue (Month): 4 (December)
    Pages: 307-325

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    Handle: RePEc:eme:jfeppp:v:2:y:2010:i:4:p:307-325

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    Web page: http://www.emeraldinsight.com

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    Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
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    Related research

    Keywords: Economic integration; Finance and accounting; Globalization; Macroeconomics;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    11. Ross Levine, 2004. "Finance and Growth: Theory and Evidence," NBER Working Papers 10766, National Bureau of Economic Research, Inc.
    12. M Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2009. "Financial Globalization: A Reappraisal," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 8-62, April.
    13. Leonardo Bartolini & Allan Drazen, 1996. "Capital Account Liberalization as a Signal," NBER Working Papers 5725, National Bureau of Economic Research, Inc.
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    17. Jonathan E. Haskel & Sonia C. Pereira & Matthew J. Slaughter, 2002. "Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?," Working Papers 452, Queen Mary, University of London, School of Economics and Finance.
    18. Ilan Noy & Tam B. Vu, 2007. "Capital Account Liberalization and Foreign Direct Investment," Working Papers 200708, University of Hawaii at Manoa, Department of Economics.
    19. Alfaro, Laura & Hammel, Eliza, 2007. "Capital flows and capital goods," Journal of International Economics, Elsevier, vol. 72(1), pages 128-150, May.
    20. Buch, Claudia M. & Doepke, Joerg & Pierdzioch, Christian, 2005. "Financial openness and business cycle volatility," Journal of International Money and Finance, Elsevier, vol. 24(5), pages 744-765, September.
    21. Torsten Sløk & Michael Klein & Luca Antonio Ricci & Hali J. Edison, 2002. "Capital Account Liberalization and Economic Performance," IMF Working Papers 02/120, International Monetary Fund.
    22. Maurice Obstfeld, 2009. "International Finance and Growth in Developing Countries: What Have We Learned?," NBER Working Papers 14691, National Bureau of Economic Research, Inc.
    23. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
    24. Kose, M. Ayhan & Prasad, Eswar S. & Terrones, Marco E., 2006. "How do trade and financial integration affect the relationship between growth and volatility?," Journal of International Economics, Elsevier, vol. 69(1), pages 176-202, June.
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    26. Dennis P. Quinn & A. Maria Toyoda, 2008. "Does Capital Account Liberalization Lead to�Growth?," Review of Financial Studies, Society for Financial Studies, vol. 21(3), pages 1403-1449, May.
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