International Finance and Growth in Developing Countries : What Have We Learned?

Despite an abundance of cross-section, panel, and event studies, there is strikingly little convincing documentation of direct positive impacts of financial opening on the economic welfare levels or growth rates of developing countries. The econome...

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Bibliographic Details
Main Author:	Obstfeld, Maurice
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2017
Subjects:	AGENCY PROBLEM ALLOCATION OF CAPITAL ASSET POSITIONS ASYMMETRIC INFORMATION BAILOUT BALANCE SHEET BALANCE SHEETS BANK FINANCING BANK REGULATIONS BANK SUPERVISION BANKING CRISES BANKING CRISIS BANKING SECTOR BIDS BORROWING COST BORROWING COSTS CAPITAL ACCOUNT CAPITAL ACCOUNT LIBERALIZATION CAPITAL ACCOUNTS CAPITAL ASSET PRICING CAPITAL FLOWS CAPITAL INFLOW CAPITAL INFLOWS CAPITAL MARKET CAPITAL MARKET LIBERALIZATION CAPITAL MARKETS CAPITAL MOBILITY CAPITAL MOVEMENTS CAPITAL OUTFLOW CAPITAL STOCK CAPITAL STOCKS CENTRAL BANK CENTRAL BANK INDEPENDENCE COLLATERAL COMMODITY PRICES CONSUMER DURABLE CORPORATE GOVERNANCE CORPORATE INSIDERS COUNTRY RISK CREDIBILITY CREDIT GROWTH CREDIT RISK CRISIS COUNTRIES CURRENCY CURRENCY COMPOSITION CURRENCY CRISIS CURRENCY DEPRECIATION CURRENCY MISMATCH CURRENCY MISMATCHES CURRENCY RISK CURRENT ACCOUNT DEFICIT CURRENT ACCOUNT SURPLUS CURRENT ACCOUNT SURPLUSES DEBT DEBT CRISIS DEFAULT PROBABILITIES DEFICITS DEPOSIT DERIVATIVES DERIVATIVES MARKETS DEVALUATION DEVELOPING COUNTRIES DEVELOPING COUNTRY DOMESTIC EQUITY DOMESTIC FINANCIAL MARKETS DURABLE GOOD ECONOMIC EFFICIENCY ECONOMIC RISKS EMERGING ECONOMIES EMERGING MARKET EMERGING MARKET ECONOMY EMERGING MARKETS ENFORCEMENT SYSTEM EQUITY HOLDING EQUITY INVESTMENT EQUITY MARKET EQUITY MARKET CAPITALIZATION EQUITY RETURNS EQUITY STAKE EXCHANGE RATE EXCHANGE RATE MOVEMENTS EXOGENOUS RATE EXPORTERS EXPROPRIATION EXTERNAL BORROWING EXTERNAL DEBT EXTERNAL DEFICITS FACE VALUE FINANCIAL ASSETS FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DEVELOPMENT FINANCIAL DISTRESS FINANCIAL FLOWS FINANCIAL FRAGILITY FINANCIAL INSTABILITY FINANCIAL INSTITUTIONS FINANCIAL LIBERALIZATION FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL OPENNESS FINANCIAL SECTOR DEVELOPMENT FINANCIAL STABILITY FINANCIAL STRUCTURES FINANCIAL SYSTEM FINANCIAL SYSTEMS FIRM PERFORMANCE FISCAL DEFICIT FISCAL DEFICITS FISCAL POLICIES FIXED EXCHANGE RATE FIXED EXCHANGE RATES FLEXIBLE EXCHANGE RATE FLEXIBLE EXCHANGE RATES FLOATING EXCHANGE RATE FLOATING RATES FOREIGN CAPITAL FOREIGN CURRENCY FOREIGN INVESTOR FOREIGN INVESTORS FREE CAPITAL GLOBAL CAPITAL GLOBAL CAPITAL MARKETS GLOBAL DEVELOPMENT FINANCE GLOBALIZATION GOVERNANCE STANDARDS GOVERNMENT BORROWING GOVERNMENT BORROWING RATES GOVERNMENT DEBT GOVERNMENT FINANCES GOVERNMENT GUARANTEES GOVERNMENT POLICIES HOME EQUITY HUMAN CAPITAL INCOME VOLATILITY INDIVIDUAL INVESTORS INFLATION INFLATIONARY PRESSURES INFORMATIONAL ASYMMETRIES INSTITUTIONAL DEVELOPMENT INSURANCE INTANGIBLE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL CAPITAL INTERNATIONAL DEVELOPMENT INTERNATIONAL FINANCE INTERNATIONAL FINANCIAL INTEGRATION INTERNATIONAL FINANCIAL MARKETS INTERNATIONAL PORTFOLIOS INTERNATIONAL TRADE INTERNATIONAL TRANSACTIONS INVESTMENT PROJECTS INVESTMENT RATE JUDICIAL ENFORCEMENT LABOR MARKET LIQUIDITY LOCAL STOCK MARKET MACROECONOMIC POLICY MACROECONOMIC VOLATILITY MALFEASANCE MARKET DISCIPLINE MARKET ECONOMY MARKET PARTICIPANTS MATURITIES MONETARY POLICY MONEYLENDERS MORAL HAZARD MORAL HAZARDS MORTGAGE OPEN ECONOMIES POLICY RESPONSE POLITICAL STABILITY PORTFOLIO PRICE CHANGE PRIVATE CAPITAL PRIVATE INVESTMENT PROPERTY RIGHTS PUBLIC DEBT PUBLIC FINANCES PURCHASING POWER REAL EXCHANGE RATE REGULATORY FRAMEWORK REGULATORY STRUCTURE REPAYMENT REPAYMENT OF PRINCIPAL RESERVE RESERVE REQUIREMENT RESERVES RETURN RETURNS RISK SHARING RULE OF LAW SHARE OF EQUITY SHAREHOLDER SHAREHOLDERS SHORT MATURITIES SHORT MATURITY SHORT-TERM DEBT STOCK MARKET STOCK MARKET PRICES TAX TRADE LIBERALIZATIONS TRADING TRANSPARENCY UNDERDEVELOPED FINANCIAL SECTOR WORLD STOCK MARKET
Online Access:	http://documents.worldbank.org/curated/en/546061468146057858/International-finance-and-growth-in-developing-countries-what-have-we-learned http://hdl.handle.net/10986/28029

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Summary:	Despite an abundance of cross-section, panel, and event studies, there is strikingly little convincing documentation of direct positive impacts of financial opening on the economic welfare levels or growth rates of developing countries. The econometric difficulties are similar to those that bedevil the literature on trade openness and growth, though if anything, they are more severe in the context of international finance. There is also little systematic evidence that financial opening raises welfare indirectly by promoting collateral reforms of economic institutions or policies. At the same time, opening the financial account does appear to raise the frequency and severity of economic crises. Nonetheless, developing countries continue to move in the direction of further financial openness. A plausible explanation is that financial development is a concomitant of successful economic growth, and a growing financial sector in an economy open to trade cannot long be insulated from cross?border financial flows. This survey discusses the policy framework in which financial globalization is most likely to prove beneficial for developing countries. The reforms developing countries need to carry out to make their economies safe for international asset trade are the same reforms they need to carry out to curtail the power of entrenched economic interests and liberate the economy's productive potential.

International Finance and Growth in Developing Countries : What Have We Learned?

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