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International financial remoteness and macroeconomic volatility

  • Andrew K. Rose
  • Mark M. Spiegel

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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Paper provided by Federal Reserve Bank of San Francisco in its series Working Paper Series with number 2008-01.

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Date of creation: 2007
Date of revision:
Handle: RePEc:fip:fedfwp:2008-01
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  19. Hélène Rey & Philippe Martin, 2006. "Globalization and Emerging Markets: With or Without Crash?," American Economic Review, American Economic Association, vol. 96(5), pages 1631-1651, December.
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