TY - JOUR AU - Prasad, Eswar S AU - Rogoff, Kenneth S AU - Wei, Shang-Jin AU - Kose, M. Ayhan TI - Financial Globalization, Growth and Volatility in Developing Countries JF - National Bureau of Economic Research Working Paper Series VL - No. 10942 PY - 2004 Y2 - December 2004 DO - 10.3386/w10942 UR - http://www.nber.org/papers/w10942 L1 - http://www.nber.org/papers/w10942.pdf N1 - Author contact info: Eswar S. Prasad Dyson School of Applied Economics and Management Cornell University 301A Warren Hall Ithaca, NY 14853 Tel: 607/255-5687 Fax: 607/255-9984 E-Mail: eswar.prasad@cornell.edu Kenneth S. Rogoff Thomas D Cabot Professor of Public Policy Economics Department Harvard University Littauer Center 216 Cambridge, MA 02138-3001 Tel: 617-495-4022 Fax: 617/495-7730 E-Mail: krogoff@harvard.edu Shang-Jin Wei Graduate School of Business Columbia University Uris Hall 619 3022 Broadway New York, NY 10027-6902 Tel: 212/854-9139 E-Mail: shangjin.wei@columbia.edu M. Ayhan Kose World Bank 1818 H St NW Washington, DC 20433 E-Mail: akose@worldbank.org M1 - published as Eswar S. Prasad, Kenneth Rogoff, Shang-Jin Wei, M. Ayhan Kose. "Financial Globalization, Growth and Volatility in Developing Countries," in Ann Harrison, editor, "Globalization and Poverty" University of Chicago Press (2007) AB - This paper provides a comprehensive assessment of empirical evidence about the impact of financial globalization on growth and volatility in developing countries. The results suggest that it is difficult to establish a robust causal relationship between financial integration and economic growth. Furthermore, there is little evidence that developing countries have been consistently successful in using financial integration to stabilize fluctuations in consumption growth. However, we do find that financial globalization can be beneficial under the right circumstances. Empirically, good institutions and quality of governance are crucial in helping developing countries derive the benefits of globalization. Similarly, macroeconomic stability appears to be an important prerequisite for ensuring that financial globalization is beneficial for developing countries. Finally, countries that employ relatively flexible exchange rate regimes and succeed in maintaining fiscal discipline are more likely to enjoy the potential growth and stabilization benefits of financial globalization. ER -