Making International Financial Integration Work for Low-Saving Countries
Deeper financial integration is expected to enable low-saving countries to increase domestic investment but also to increase crisis risks by facilitating the accumulation of risky foreign liabilities. This paper explores the connections between financial integration, investment and crisis risk to assess this tradeoff. It confirms expectations but also finds that the accumulation of safe foreign assets that financial integration brings is an important risk offset that in many cases even eliminates the risk factor from the tradeoff altogether. Furthermore, it shows that the risk features of assets and liabilities depend on their type. Ultimately, whether international financial integration is in fact a reliable remedy for individual countries critically depends on the portfolio composition of their foreign assets and liabilities.
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| Format: | Working Papers biblioteca |
| Language: | English |
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Inter-American Development Bank
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| Subjects: | Macroeconomy, G15 - International Financial Markets, F32 - Current Account Adjustment • Short-Term Capital Movements, G01 - Financial Crises, H63 - Debt • Debt Management • Sovereign Debt, F34 - International Lending and Debt Problems, E44 - Financial Markets and the Macroeconomy, |
| Online Access: | http://dx.doi.org/10.18235/0011806 https://publications.iadb.org/en/making-international-financial-integration-work-low-saving-countries |
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