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Mr. Ayhan Kose, Mr. Kenneth Rogoff, Mr. Eswar S Prasad, and Shang-Jin Wei

Abstract

This study provides a candid, systematic, and critical review of recent evidence on this complex subject. Based on a review of the literature and some new empirical evidence, it finds that (1) in spite of an apparently strong theoretical presumption, it is difficult to detect a strong and robust causal relationship between financial integration and economic growth; (2) contrary to theoretical predictions, financial integration appears to be associated with increases in consumption volatility (both in absolute terms and relative to income volatility) in many developing countries; and (3) there appear to be threshold effects in both of these relationships, which may be related to absorptive capacity. Some recent evidence suggests that sound macroeconomic frameworks and, in particular, good governance are both quantitatively and qualitatively important in affecting developing countries’ experiences with financial globalization.

Mr. Ayhan Kose, Mr. Kenneth Rogoff, Mr. Eswar S Prasad, and Shang-Jin Wei

Abstract

The recent wave of financial globalization that has occurred since the mid-1980s has been marked by a surge in capital flows among industrial countries and, more notably, between industrial and developing countries. Although capital inflows have been associated with high growth rates in some developing countries, a number of them have also experienced periodic collapses in growth rates and significant financial crises that have had substantial macroeconomic and social costs. As a result, an intense debate has emerged in both academic and policy circles on the effects of financial integration on developing economies. But much of the debate has been based on only casual and limited empirical evidence.

Mr. Ayhan Kose, Mr. Kenneth Rogoff, Mr. Eswar S Prasad, and Shang-Jin Wei

Abstract

Measures of de jure restrictions on capital flows and actual capital flows across national borders are two indicators of the extent of a country’s financial integration with the global economy. Understanding the differences between them is important when evaluating the effects of financial integration. By either measure, developing countries’ financial linkages with the global economy have risen in recent years.1 A relatively small group of developing countries, however, has garnered the lion’s share of private capital flows from industrial to developing countries, which surged in the 1990s. Structural factors, including demographic shifts in industrial countries, are likely to provide an impetus to these North-South flows over the medium and long terms.

Mr. Ayhan Kose, Mr. Kenneth Rogoff, Mr. Eswar S Prasad, and Shang-Jin Wei

Abstract

Theoretical models have identified a number of channels through which international financial integration can help to promote economic growth in the developing world. It has proven difficult, however, to empirically identify a strong and robust causal relationship between financial integration and growth.

Raquel Fernández, Asel Isakova, Francesco Luna, and Barbara Rambousek
This paper considers various dimensions and sources of gender inequality and presents policies and best practices to address these. With women accounting for fifty percent of the global population, inclusive growth can only be achieved if it promotes gender equality. Despite recent progress, gender gaps remain across all stages of life, including before birth, and negatively impact health, education, and economic outcomes for women. The roadmap to gender equality has to rely on legal framework reforms, policies to promote equal access, and efforts to tackle entrenched social norms. These need to be set in the context of arising new trends such as digitalization, climate change, as well as shocks such as pandemics.
Mr. Abdul d Abiad, Nienke Oomes, and Mr. Kenichi Ueda
The study documents evidence of a "quality effect" of financial liberalization on allocative efficiency, which is measured by the dispersion in Tobin's Q across firms. Based on a simple model, the authors predict that financial liberalization, by equalizing access to credit, reduces the variation in expected marginal returns. They test this prediction using a new financial liberalization index and firm-level data for five emerging markets: India, Jordan, Korea, Malaysia, and Thailand. They find strong evidence that financial liberalization, rather than financial deepening, improves allocative efficiency.

Abstract

This volume examines how independent evaluation contributes to the legitimacy and effectiveness of the IMF. It describes the evolution and impact of the Independent Evaluation Office ten years after its creation as well as the challenges it has faced. It also incorporates feedback from a wide range of internal and external actors and offers useful insights for international organizations, academics, and other global stakeholders.

Mr. Ayhan Kose, Mr. Kenneth Rogoff, Mr. Eswar S Prasad, and Shang-Jin Wei

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.

Sijbren Cnossen

In most countries, sales taxes and excises are the mainstay of the revenue budget. In view of their revenue potential and because they are relatively easily administered, they are attractive and dependable sources of income for governments faced with seemingly ever-escalating expenditures. The author looks at the structure and revenue importance of sales taxes and excises, and examines their role in economic development.

Mr. Ayhan Kose, Mr. Kenneth Rogoff, Mr. Eswar S Prasad, and Shang-Jin Wei

Abstract

There is some evidence of a “threshold effect” in the relationship between financial integration and economic growth. Moreover, there is some preliminary evidence supporting the view that better national governance is associated with lower volatility and enhanced benefits from financial integration.