average higher volatility of output growth (1) accumulated higher external assets in the long-run and (2) experienced more … procyclical capital outflows over the business cycle than those countries with a same growth rate but a more stable output path …. To explain this finding we provide a theoretical mechanism within a stochastic real business cycle growth model in which …

risk, financial openness decreases output volatility, while, in countries with high financial risk, financial openness … volatility. In the framework of a threshold model, it is shown empirically that this relation depends on country's financial risk … increases output volatility. Extensive robustness checks confirm this result. …

States of the European Union, to test if the same short-run increase in cyclical volatility arising from financial … mature market economies, reduces cyclical volatility both in the short and in the long run. Weak indications are found that …