| Summary: | This paper discusses the benefits and risks that financial globalization entails for
developing countries. Financial globalization can lead to large benefits, particularly to
the development of the financial system. But financial globalization can also come with
crises and contagion. The net effect of financial globalization is likely positive in the
long run, with risks being more prevalent right after countries liberalize. So far, only
some countries, sectors, and firms have taken advantage of globalization. As financial
systems turn global, governments lose policy instruments, so there is an increasing scope
for some form of international financial policy cooperation.
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