Financial globalization in emerging economies:Much ado about nothing?
Financial globalization (FG), defined as global linkages through cross-border financial flows, has become increasingly relevant for emerging markets (EM) as they integrate financially to the rest of the world. In this paper, we argue that, because of the way it is often measured, it has also led to the misperception that FG in EM has been growing in recent years. We characterize the evolution of FG in EM using alternative measures, and find that, in the 2000s, FG have grown only marginally and international portfolio diversification has been very limited, and declining over time. Next, we revisit the empirical literature on the implications of FG for local market deepening, international risk diversification, financial contagion, and financial dollarization, and we find them to be rather limited. Whereas FG has indeed fostered domestic market deepening in good times, it has yielded neither the dividends of consumption smoothing (in line with the limited portfolio diversification) nor the costs of amplifying global financial shocks. In turn, financial de-dollarization has largely reflected the undoing of financial offshoring and the valuation effects of real appreciation.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.utdt.edu/listado_contenidos.php?id_item_menu=4994
More information through EDIRC
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.:
- Levy Yeyati, Eduardo & Schmukler, Sergio L. & Van Horen, Neeltje, 2006.
"International financial integration through the law of one price,"
Policy Research Working Paper Series
3897, The World Bank.
- Eduardo Levy Yeyati & Sergio Luis Schmukler & Neeltje Van Horen, 2006. "International Financial Integration through the Law of One Price," Business School Working Papers 2006-01, Universidad Torcuato Di Tella.
- Kraay, Aart & Loayza, Norman & Serven, Luis & Ventura, Jaume, 2004.
Policy Research Working Paper Series
3320, The World Bank.
- Aart Kraay & Norman Loayza & Luis Servén, 2001. "Country portfolios," Working Papers Central Bank of Chile 91, Central Bank of Chile.
- Kraay, Aart & Loayza, Norman & Servén, Luis & Ventura, Jaume, 2001. "Country Portfolios," CEPR Discussion Papers 2974, C.E.P.R. Discussion Papers.
- Aart Kraay & Norman Loayza & Luis Servén & Jaume Ventura, 2000. "Country portfolios," Economics Working Papers 913, Department of Economics and Business, Universitat Pompeu Fabra.
- Aart Kraay & Norman Loayza & Luis Serven & Jaume Ventura, 2000. "Country Portfolios," NBER Working Papers 7795, National Bureau of Economic Research, Inc.
- Baltagi, Badi H. & Demetriades, Panicos O. & Law, Siong Hook, 2009.
"Financial development and openness: Evidence from panel data,"
Journal of Development Economics,
Elsevier, vol. 89(2), pages 285-296, July.
- Badi H. Baltagi & Panicos O. Demetriades & Siong Hook Law, 2008. "Financial Development and Openness: Evidence from Panel Data," Center for Policy Research Working Papers 107, Center for Policy Research, Maxwell School, Syracuse University.
- Kaminsky, Graciela L. & Schmukler, Sergio L., 1999.
"What triggers market jitters?: A chronicle of the Asian crisis,"
Journal of International Money and Finance,
Elsevier, vol. 18(4), pages 537-560, August.
- Kaminsky, Graciela L. & Schmukler, Sergio L., 1999. "What triggers market jitters? A chronicle of the Asian crisis," Policy Research Working Paper Series 2094, The World Bank.
- Graciela L. Kaminsky & Sergio L. Schmukler, 1999. "What triggers market jitters: a chronicle of the Asian crisis," International Finance Discussion Papers 634, Board of Governors of the Federal Reserve System (U.S.).
- Bai, Yan & Zhang, Jing, 2012.
"Financial integration and international risk sharing,"
Journal of International Economics,
Elsevier, vol. 86(1), pages 17-32.
- Yan Bai & Jing Zhang, 2006. "Financial Integration and International Risk Sharing," 2006 Meeting Papers 371, Society for Economic Dynamics.
- Yan Bai & Jing Zhang, 2009. "Financial Integration and International Risk Sharing," Working Papers 594, Research Seminar in International Economics, University of Michigan.
- Andrew K. Rose & Mark M. Spiegel, 2011.
"Cross-country causes and consequences of the crisis: an update,"
Working Paper Series
2011-02, Federal Reserve Bank of San Francisco.
- Rose, Andrew K. & Spiegel, Mark M., 2011. "Cross-country causes and consequences of the crisis: An update," European Economic Review, Elsevier, vol. 55(3), pages 309-324, April.
- Andrew K. Rose & Mark M. Spiegel, 2010. "Cross-Country Causes and Consequences of the Crisis: An Update," NBER Working Papers 16243, National Bureau of Economic Research, Inc.
- Rose, Andrew K & Spiegel, Mark, 2010. "Cross-Country Causes and Consequences of the Crisis: An Update," CEPR Discussion Papers 7901, C.E.P.R. Discussion Papers.
- Stijn Claessens & Luc Laeven & Deniz Igan & Giovanni Dell'Ariccia, 2010. "Lessons and Policy Implications From the Global Financial Crisis," IMF Working Papers 10/44, International Monetary Fund.
- Kose, M. Ayhan & Prasad, Eswar & Rogoff, Kenneth & Wei, Shang-Jin, 2009.
"Financial Globalization and Economic Policies,"
IZA Discussion Papers
4037, Institute for the Study of Labor (IZA).
- Martin Schindler, 2009. "Measuring Financial Integration: A New Data Set," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 222-238, April.
When requesting a correction, please mention this item's handle: RePEc:udt:wpbsdt:2011-01. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nicolás Del Ponte)
If references are entirely missing, you can add them using this form.