This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Domestic Institutions and the Bypass Effect of Financial Globalization

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Ju, Jiandong
Wei, Shang-Jin

Additional information is available for the following registered author(s):

Abstract

This paper proposes a simple model to study the relationship between domestic institutions - financial system, corporate governance, and property rights protection - and patterns of international capital flows. It studies conditions under which financial globalization can be a substitute for reforms of domestic financial system. Inefficient financial system and poor corporate governance in a country may be completely bypassed by two-way capital flows in which domestic savings leave the country in the form of financial capital outflows but domestic investment takes place via inward foreign direct investment. While financial globalization always improves the welfare of a developed country with a good financial system, its effect is ambiguous for a developing country with an inefficient financial sector/poor corporate governance. However, the net effect for a developing country is more likely to be positive, the stronger its property rights protection. This is consistent with the observation that developed countries are often more enthusiastic about capital account liberalization around the world than many developing countries. A noteworthy feature of this theory is that financial and property rights institutions can have different effects on capital flows.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cepr.org/pubs/dps/DP6343.asp
File Format: application/pdf
File Function:
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6343.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:cpr:ceprdp:6343

Contact details of provider:
Postal: Centre for Economic Policy Research, 53--56 Great Sutton Street, London EC1V 0DG
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information:
Email:

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords: corporate governance; financial development; international capital flows; property rights protection;

Other versions of this item:

Find related papers by JEL classification:
F2 - International Economics - - International Factor Movements and International Business
F3 - International Economics - - International Finance

This paper has been announced in the following NEP Reports:

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.:
  1. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The revived Bretton Woods system," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(4), pages 307-313. [Downloadable!]
  2. M. Ayhan Kose & Eswar Prasad & Kenneth S. Rogoff & Shang-Jin Wei, 2006. "Financial Globalization: A Reappraisal," NBER Working Papers 12484, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Lane, Philip & Milesi-Ferretti, Gian Maria, . "External Wealth of Nations," Instructional Stata datasets for econometrics extwealth, Boston College Department of Economics. [Downloadable!]
  4. Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2006. "An Equilibrium Model of Global Imbalances and Low Interest Rates," 2006 Meeting Papers 894, Society for Economic Dynamics. [Downloadable!]
    Other versions:
  5. Shleifer, Andrei & Wolfenzon, Daniel, 2002. "Investor protection and equity markets," Journal of Financial Economics, Elsevier, vol. 66(1), pages 3-27, October. [Downloadable!] (restricted)
    Other versions:
  6. Gertler, Mark & Rogoff, Kenneth, 1990. "North-South lending and endogenous domestic capital market inefficiencies," Journal of Monetary Economics, Elsevier, vol. 26(2), pages 245-266, October. [Downloadable!] (restricted)
  7. Goldstein, Itay & Razin, Assaf, 2006. "An information-based trade off between foreign direct investment and foreign portfolio investment," Journal of International Economics, Elsevier, vol. 70(1), pages 271-295, September. [Downloadable!] (restricted)
    Other versions:
  8. Kenneth Rogoff & M. Ayhan Kose & Eswar Prasad & Shang-Jin Wei, 2004. "Effects on Financial Globalization on Developing Countries: Some Empirical Evidence," IMF Occasional Papers 220, International Monetary Fund.
  9. Enrique G. Mendoza & Vincenzo Quadrini & Jose-Victor Rios-Rull, 2007. "Financial Integration, Financial Deepness and Global Imbalances," NBER Working Papers 12909, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Shang-Jin Wei, 2000. "Local Corruption and Global Capital Flows," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(2000-2), pages 303-354. [Downloadable!]
  11. Kiminori Matsuyama, 2005. "Credit Market Imperfections and Patterns of International Trade and Capital Flows," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 714-723, 04/05. [Downloadable!] (restricted)
    Other versions:
  12. Holmstrom, Bengt & Tirole, Jean, 1997. "Financial Intermediation, Loanable Funds, and the Real Sector," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 663-91, August.
    Other versions:
  13. 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. [Downloadable!] (restricted)
  14. Rene M. Stulz, 2005. "The Limits of Financial Globalization," NBER Working Papers 11070, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  15. Daron Acemoglu & Simon Johnson, 2005. "Unbundling Institutions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 949-995, October.
    Other versions:
  16. Jiandong Ju & Shang-Jin Wei, 2006. "A Solution to Two Paradoxes of International Capital Flows," NBER Working Papers 12668, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  17. Stulz, Rene M., 2005. "The Limits of Financial Globalization," Working Paper Series 2005-1, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
  18. Pol Antràs & Mihir A. Desai & C. Fritz Foley, 2007. "Multinational Firms, FDI Flows and Imperfect Capital Markets," NBER Working Papers 12855, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  19. Kiminori Matsuyama, 2004. "Financial Market Globalization, Symmetry-Breaking, and Endogenous Inequality of Nations," Econometrica, Econometric Society, vol. 72(3), pages 853-884, 05. [Downloadable!] (restricted)
    Other versions:
  20. Wei, Shang-Jin, 2006. "Connecting two views on financial globalization: Can we make further progress?," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 459-481, December. [Downloadable!] (restricted)
  21. Shang-Jin Wei, 2000. "How Taxing is Corruption on International Investors?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 1-11, February. [Downloadable!] (restricted)
    Other versions:
  22. Gordon, Roger H & Bovenberg, A Lans, 1996. "Why Is Capital So Immobile Internationally? Possible Explanations and Implications for Capital Income Taxation," American Economic Review, American Economic Association, vol. 86(5), pages 1057-75, December. [Downloadable!] (restricted)
    Other versions:
  23. Razin, Assaf & Sadka, Efraim, 2007. "Corporate transparency, cream-skimming and FDI," European Economic Review, Elsevier, vol. 51(5), pages 1263-1276, July. [Downloadable!] (restricted)
  24. Pierre-Olivier Gourinchas & Olivier Jeanne, 2007. "Capital Flows to Developing Countries: The Allocation Puzzle," NBER Working Papers 13602, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  25. Eswar Prasad & Raghuram G. Rajan & Arvind Subramanian, 2006. "Patterns of international capital flows and their implications for economic development," Proceedings, Federal Reserve Bank of Kansas City, pages 119-158. [Downloadable!]
Full references

Cited by:
(explanations, 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.)

  1. Joshua Aizenman & Yothin Jinjarak, 2008. "The US as the "Demander of Last Resort" and its Implications on China's Current Account," NBER Working Papers 14453, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Joshua Aizenman & Yi Sun, 2008. "Globalization and the Sustainability of Large Current Account Imbalances: Size Matters," NBER Working Papers 13734, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Kenza Benhima, 2008. "A Reappraisal of the Allocation Puzzle through the Portfolio Approach," EconomiX Working Papers 2008-27, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
  4. Corinne Deléchat & Smita Wagh & Gustavo Ramirez & John Wakeman-Linn, 2009. "Sub-Saharan Africa's Integration in the Global Financial Markets," IMF Working Papers 09/114, International Monetary Fund. [Downloadable!]
  5. Jiandong Ju & Shang-Jin Wei, 2008. "When Is Quality of Financial System a Source of Comparative Advantage?," NBER Working Papers 13984, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Agustín S. Bénétrix and Sébastien Wälti, 2008. "Indicators of regional financial integration," The Institute for International Integration Studies Discussion Paper Series iiisdp243, IIIS. [Downloadable!]
  7. Papaioannou, Elias, 2008. "What Drives International Financial Flows? Politics, Institutions and Other Determinants," CEPR Discussion Papers 7010, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Statistics
Access and download statistics

Did you know? Each page is provided with a technical contact, in case something is not right with the supplied information. See under "publisher info".

This page was last updated on 2009-11-25.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.