Financial Globalization in Emerging Economies : Much Ado about Nothing?

Financial globalization, defined as global linkages through cross-border financial flows, has become increasingly relevant for emerging markets as they integrate financially with the rest of the world. This paper argues that, because of the way it is often measured, it has also led to the misperception that financial globalization in emerging markets has been growing in recent years. The authors characterize the evolution of financial globalization in emerging markets using alternative measures, and find that, in the 2000s, financial globalization has grown only marginally and international portfolio diversification has been limited and declining over time. The paper revisits the empirical literature on the implications of financial globalization for local market deepening, international risk diversification, financial contagion, and financial dollarization, and finds them to be rather limited. Whereas financial globalization has indeed fostered domestic market deepening in good times, it has yielded neither the dividends of consumption smoothing (in line with limited portfolio diversification) nor the costs of amplifying global financial shocks. In turn, financial de-dollarization has largely reflected the undoing of financial offshoring and the valuation effects of real appreciation.

Bibliographic Details

Main Authors:	Yeyati, Eduardo Levy, Williams, Tomas
Language:	English
Published:	2011-04-01
Subjects:	ADVANCED COUNTRIES, ADVANCED ECONOMIES, ARBITRAGE, ASSET HOLDINGS, ASSET POSITIONS, ASSET PRICE, ASSET PRICES, ASSET TYPE, BALANCE OF PAYMENTS, BALANCE SHEETS, BANK DEPOSITS, BANKING SECTOR, BENCHMARKS, BOND, BOND FUNDS, BUSINESS CYCLE, CAPITAL ACCOUNT, CAPITAL ACCOUNT LIBERALIZATION, CAPITAL CONTROLS, CAPITAL FLIGHT, CAPITAL FLOW, CAPITAL FLOWS, CAPITAL MOBILITY, CAPITAL OUTFLOWS, CAPITAL REPATRIATION, CAPITAL STOCK, CDS, CENTRAL BANK, CONSUMPTION SMOOTHING, CORPORATE DEBT, CREDIT RISKS, CREDIT SPREADS, CRISIS COUNTRY, CROSS-BORDER FLOWS, CROSS-BORDER INVESTMENTS, CURRENCY, CURRENCY MISMATCHES, CURRENCY RISK, DEBT, DEBT FLOWS, DEBT HOLDINGS, DEBT INSTRUMENTS, DEBT RATIOS, DEBT SECURITIES, DEBTS, DEGREE OF RISK, DEPOSIT, DERIVATIVES, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPING ECONOMIES, DEVELOPING MARKETS, DEVELOPMENT BANK, DIVERSIFICATION BENEFITS, DIVERSIFIED PORTFOLIO, DIVIDENDS, DOMESTIC ECONOMY, DOMESTIC EQUITY, DOMESTIC FINANCIAL MARKETS, DOMESTIC MARKET, DOMESTIC MARKETS, ECONOMIC DEVELOPMENT, ECONOMIC PERFORMANCE, ECONOMIC POLICIES, EMERGING ECONOMIES, EMERGING MARKETS, EQUITIES, EQUITY FLOWS, EQUITY HOLDINGS, EQUITY INDEXES, EQUITY INSTRUMENTS, EQUITY MARKET, EQUITY MARKET CAPITALIZATION, EQUITY MARKETS, EQUITY PORTFOLIO, EQUITY PORTFOLIOS, EQUITY PRICE, EQUITY PRICES, EQUITY RETURNS, EQUITY VALUATION, EXCHANGE RATES, EXPOSURE, EXTERNAL DEBT, FINANCIAL ASSETS, FINANCIAL CONTAGION, FINANCIAL CRISES, FINANCIAL CRISIS, FINANCIAL DEVELOPMENT, FINANCIAL FLOWS, FINANCIAL FRAGILITY, FINANCIAL INNOVATION, FINANCIAL MARKET, FINANCIAL OPENNESS, FINANCIAL PORTFOLIOS, FINANCIAL RISK, FINANCIAL SECTOR, FINANCIAL SHOCKS, FINANCIAL STABILITY, FIXED INCOME, FIXED INCOME MARKETS, FIXED INCOME SECURITIES, FLOWS OF CAPITAL, FOREIGN ASSET, FOREIGN ASSETS, FOREIGN CAPITAL, FOREIGN DEBT, FOREIGN EQUITY, FOREIGN HOLDINGS, FOREIGN INFLOWS, FOREIGN INVESTMENT, FOREIGN LENDERS, FOREIGN PORTFOLIO, FOREIGN SHARE, GLOBAL DIVERSIFICATION, GLOBAL EQUITY, GLOBAL FUND, GLOBAL FUNDS, GLOBAL MARKET, GLOBAL MUTUAL FUNDS, GLOBAL PORTFOLIO, GLOBAL RISK, GLOBALIZATION, GROWTH RATE, GROWTH RATES, HEDGE FUND, HEDGE FUNDS, HOLDING, HOST COUNTRY, INCOME FLOWS, INCOME SHOCKS, INDEBTED COUNTRIES, INFLATION, INSTRUMENT, INTERNATIONAL BANK, INTERNATIONAL DIVERSIFICATION, INTERNATIONAL ECONOMICS, INTERNATIONAL FINANCE, INTERNATIONAL FINANCIAL INTEGRATION, INTERNATIONAL FINANCIAL MARKETS, INTERNATIONAL INVESTOR, INTERNATIONAL INVESTORS, INTERNATIONAL PORTFOLIO, INTERNATIONAL SECURITIES, INVESTING, INVESTMENT VEHICLES, ISSUANCE, LEVY, LIABILITY, LIQUID MARKETS, LIQUIDITY, LIQUIDITY CRUNCH, LIQUIDITY RISKS, LOCAL DEBT, LOCAL DEBT MARKETS, LOCAL EQUITY MARKETS, LOCAL MARKET, LOCAL MARKETS, LOCAL STOCK MARKET, LOW-INCOME COUNTRIES, MACROECONOMIC VOLATILITY, MARKET CONDITIONS, MARKET DEEPENING, MARKET DEPTH, MARKET DEVELOPMENT, MARKET DEVELOPMENTS, MARKET DISCOUNTS, MARKET INVESTMENT, MARKET SIZE, MARKET VALUE, MARKET VALUES, MIDDLE-INCOME ECONOMIES, MONETARY FUND, MUTUAL FUNDS, NET DEBT, OPEN ECONOMY, OUTPUT, PHYSICAL ASSETS, PORTFOLIO COMPOSITION, PORTFOLIO DIVERSIFICATION, PORTFOLIO FLOWS, PORTFOLIO HOLDINGS, PORTFOLIO INVESTOR, PORTFOLIO RISK, PORTFOLIOS, PRICE CHANGES, PRICE VOLATILITY, PRIVATE CREDIT, PROFESSIONAL INVESTORS, REDEMPTIONS, RESERVE, RETURN, RETURN DIFFERENTIALS, RETURNS, RISK AVERSION, RISK DIVERSIFICATION, RISK POOLING, RISK SHARING, SAVINGS, SAVINGS CAPACITY, SECURITIES MARKETS, SECURITIES PORTFOLIO, SETTLEMENT, SINGLE MARKET, SOLVENCY, SOVEREIGN DEBT, STOCK DATA, STOCK MARKET, STOCK MARKET CAPITALIZATION, STOCK MARKET DEVELOPMENT, STOCKS, SWAPS, TAX, TERMS OF CREDIT, TOTAL DEBT, TRADE LIBERALIZATION, TRADES, TRADING, TRANSACTION, TRANSACTION COSTS, TRANSPARENCY, TREASURY, TURNOVER, VALUATION, VALUATION CHANGES, VOLATILITIES,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110405092056 https://hdl.handle.net/10986/3390
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