A stable net external position requires that the trade balance responds negatively to changes in the net external position. If financial integration makes financing external imbalances less costly, we expect slower external adjustment in more integrated economies. The study estimates...

Recent empirical work has shown that current account deficits have been associated with lower growth in developing countries while they have been associated with higher growth in developed countries. This paper shows that this can be rationalized in an environment where firms face (i)...

This paper addresses the macroeconomic impact of international financial integration. I first provide empirical evidence that foreign banking penetration can be associated with a contraction of banking credit, especially in countries with poor credit markets. Second I present a model in which...