IV Financial Globalization and Macroeconomic Volatility

Abstract

International financial integration should, in principle, help countries to reduce macroeconomic volatility. The survey presented in this section, including some new evidence, suggests that developing countries, in particular, have not attained this potential benefit. The process of capital account liberalization has often been accompanied by increased vulnerability to crises. Globalization has heightened these risks, since financial linkages have the potential to amplify the effects of both real and financial shocks.

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