Financial integration and growth in a risky world
Journal
Journal of Monetary Economics
Subject
Economics
Publishing details
Authors / Editors
Coeurdacier N;Rey H;Winant P
Biographies
Publication Year
2020
Abstract
We revisit the debate on the benefits of financial integration in a two-country neoclassical growth model with aggregate uncertainty. The framework accounts simultaneously for gains from a more efficient capital allocation and gains from risk sharing—together with their interaction. Global numerical methods allow for meaningful welfare comparisons. Gains from integration are quantitatively small, even for riskier and capital scarce emerging economies. These countries import capital for efficiency reasons before exporting it for self-insurance, leading to capital flows and growth reversals along the transition. This opens the door to richer empirical implications than previously considered in the literature.
Available on ECCH
No
