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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 political institutions, trade, 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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File URL: http://www.nber.org/papers/w14336.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14336.

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Date of creation: Sep 2008
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Publication status: published as Rose, Andrew K. & Spiegel, Mark M., 2009. "International financial remoteness and macroeconomic volatility," Journal of Development Economics, Elsevier, vol. 89(2), pages 250-257, July.
Handle: RePEc:nbr:nberwo:14336
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  1. Kose, M. Ayhan & Prasad, Eswar & Terrones, Marco E., 2007. "How Does Financial Globalization Affect Risk Sharing? Patterns and Channels," IZA Discussion Papers 2903, Institute for the Study of Labor (IZA).
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