Financial Integration and Macroeconomic Volatility
Financial Integration and Macroeconomic Volatility

Author: Mr.Ayhan Kose

Publisher: International Monetary Fund

Published: 2003-03-01

Total Pages: 29

ISBN-13: 1451846991

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This paper examines the impact of international financial integration on macroeconomic volatility in a large group of industrial and developing economies over the period 1960-99. We report two major results: First, while the volatility of output growth has, on average, declined in the 1990s relative to the three preceding decades, we also document that, on average, the volatility of consumption growth relative to that of income growth has increased for more financially integrated developing economies in the 1990s. Second, increasing financial openness is associated with rising relative volatility of consumption, but only up to a certain threshold. The benefits of financial integration in terms of improved risk-sharing and consumption-smoothing possibilities appear to accrue only beyond this threshold.

How Do Trade and Financial Integration Affect the Relationship Between Growth and Volatility?
How Do Trade and Financial Integration Affect the Relationship Between Growth and Volatility?

Author: M. Ayhan Kose

Publisher: International Monetary Fund

Published: 2005

Total Pages: 44

ISBN-13:

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The influential work of Ramey and Ramey (1995) highlighted an empirical relationship that has now come to be regarded as conventional wisdom-that output volatility and growth are negatively correlated. We reexamine this relationship in the context of globalization-a term typically used to describe the phenomenon of growing international trade and financial integration that has intensified since the mid-1980s. Using a comprehensive new data set, we document that, while the basic negative association between growth and volatility has been preserved during the 1990s, both trade and financial integration significantly weaken this negative relationship. Specifically, we find that, in a regression of growth on volatility and other controls, the estimated coefficient on the interaction between volatility and trade integration is significantly positive. We find a similar, although less significant, result for the interaction of financial integration with volatility.

Emerging Economy Business Cycles
Emerging Economy Business Cycles

Author: Rudrani Bhattacharya

Publisher: International Monetary Fund

Published: 2013-05-22

Total Pages: 26

ISBN-13: 1484356160

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This paper analyses the extent to which financial integration impacts the manner in which terms of trade affect business cycles in emerging economies. Using a s mall open economy model, we show that as capital account openness increases in an economy that faces trade shocks, business cycle volatility reduces. For an economy with limited financial openness, and a relatively open trade account, a model with exogenous terms of trade shocks is able to replicate the features of the business cycle.

Financial Integration and Macroeconomic Volatility in the ECCU
Financial Integration and Macroeconomic Volatility in the ECCU

Author: Kari Grenade

Publisher:

Published: 2004

Total Pages: 30

ISBN-13:

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"This paper explores the link between financial integration and macroeconomic volatility in the countries of the Eastern Caribbean Currency Union (ECCU) over the period 1986-2003. The paper distinguishes between overall macroeconomic volatility and sectoral volatility. Contrasting results are obtained. While financial integration is associated with lowering consumption volatility, it is linked with rising investment volatility. The results also show that the relationship between overall macroeconomic volatility and financial integration has not been stable over time. The paper advocates that the ECCU should ensure financial integration is accompanied by the reforms that deliver the institutional quality needed to maximize the benefits to economic welfare" -- Abstract.

Macroeconomic Volatility, Institutions and Financial Architectures
Macroeconomic Volatility, Institutions and Financial Architectures

Author: J. Fanelli

Publisher: Springer

Published: 2008-01-17

Total Pages: 425

ISBN-13: 0230590187

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The deregulation of domestic financial markets and the capital account in developing countries has frequently been associated with financial turmoil and macro volatility. The book analyzes the experiences of several countries, drawing implications for building development-friendly domestic and international financial architectures.