Working Paper: NBER ID: w10849
Authors: Maurice Obstfeld
Abstract: Among the developing countries of the world, those emerging markets that have sought some degree of integration into world finance are characterized by higher per capita incomes, higher long-run growth rates, and lower output and consumption volatility. These characteristics are more likely to be causes than effects of financial integration. The measurable gains from financial integration appear to be lower for emerging markets than for higher-income countries, and appear to have been limited by recent crises. One factor limiting the gains from financial integration is the difficulty emerging economies face in resolving the open-economy trilemma. Given their structural and institutional features, many emerging economies cannot live comfortably either with fixed or with freely floating exchange rates. Most recently, the exchange rates of several emerging countries display attempts at stabilization punctuated by high volatility in periods of market stress.
Keywords: No keywords provided
JEL Codes: O11; O16; F34; F36; F43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| financial integration (F30) | higher per capita incomes (P17) |
| financial integration (F30) | higher long-run growth rates (O49) |
| financial integration (F30) | lower output and consumption volatility (E23) |
| higher per capita incomes (P17) | financial integration (F30) |
| lower volatility (G19) | financial integration (F30) |
| difficulties in managing exchange rates (F31) | limited benefits from financial integration (F30) |
| financial integration (F30) | improved economic indicators (P17) |