Electronic Bulletin, May 2009, No. 5

Electronic Bulletin
Public Affairs Section, U.S. Consulate General, Hong Kong
May 2009, No. 5

(The Electronic Bulletin is an information service published by the Public Affairs Section of the U.S. Consulate General and provided to subscribers by e-mail and fax. Except for the U.S. Government sites, the opinions expressed on the Internet sites listed here do not necessarily represent the views of the U.S. Government.)

Financial Globalization and Economic Policies
M. Ayhan Kose, Eswar Prasad and Shang-Jin Wei
The Brookings Institution
Global Working Papers | No. 31
April 2009

This paper is available online. (PDF file)*

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We review the large literature on various economic policies that could help developing economies effectively manage the process of financial globalization. Our central findings indicate that policies promoting financial sector development, institutional quality and trade openness appear to help developing countries derive the benefits of globalization. Similarly, sound macroeconomic policies are an important prerequisite for ensuring that financial integration is beneficial. However, our analysis also suggests that the relationship between financial integration and economic policies is a complex one and that there are unavoidable tensions inherent in evaluating the risks and benefits associated with financial globalization. In light of these tensions, structural and macroeconomic policies often need to be tailored to take into account country specific circumstances to improve the risk-benefit tradeoffs of financial integration. Ultimately, it is essential to see financial integration not just as an isolated policy goal but as part of a broader package of reforms and supportive macroeconomic policies.

(Source: Abstract of the Paper from the Brookings Institution website)

Subject: Global Economy