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International Financial Remoteness and Macroeconomic Volatility

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  • Rose, Andrew K
  • Spiegel, Mark

Abstract

This paper shows that proximity to major international financial centers seems to reduce business cycle volatility. In particular, we show that countries that are further from major locations of international financial activity systematically experience more volatile growth rates in both output and consumption, even after accounting for domestic financial depth, political institutions, and other controls. Our results are relatively robust in the sense that more financially remote countries are more volatile, though the results are not always statistically significant. The comparative strength of this finding is in contrast to the more ambiguous evidence found in the literature.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6301.

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Date of creation: May 2007
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Handle: RePEc:cpr:ceprdp:6301

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Keywords: business cycle; capital; cross-section; data; distance; empirical; proximity;

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References

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