The paper provides an alternative explanation for the "resource curse" based on the income effect resulting from high government current spending in resource rich economies. Using a simple life cycle framework, we show that private investment in the non-resource sector is adversely affected if...

Standard theoretical arguments tell us that countries with relatively little capital benefit from financial integration as foreign capital flows in and speeds up the process of income convergence. We show in a calibrated neoclassical model that conventionally measured welfare gains from this...

The recent boom-bust episode in Emerging Europe was largely the product of surges and sudden stops in capital inflows. This paper empirically argues that the sectors into which capital flows determines their impact on GDP growth. Applying data from EU New Member States, it is found that capital...

The West African Economic and Monetary Union (WAEMU) regional securities market saw increasing activity in the last decade, but still fell short of supplying sufficient long-term financing for growth-enhancing public and private investment projects. In addition to providing an institutional...

The literature on the benefits and costs of financial globalization for developing countries has exploded in recent years, but along many disparate channels and with a variety of apparently conflicting results. For instance, there is still little robust evidence of the growth benefits of broad...

This paper examines why surges in capital flows to emerging market economies (EMEs) occur, and what determines the allocation of capital across countries during such surge episodes. We use two different methodologies to identify surges in EMEs over 1980-2009, differentiating between those mainly...

This paper uses a general equilibrium model to examine the central role played by commercial banks in intermediating and amplifying the capital flow shocks to the local economy in the 1997 Asia financial crisis. It finds that a sudden stop of capital inflows affects the equilibrium credit supply...

While the relationship between volatility and credit risk is central to much of the literature on finance and banking, it has been largely neglected in empirical macro studies on sovereign defaults. This paper presents new econometric estimates for a panel of 25 emerging market countries over...

This paper shows that recent manifestations of sudden stops (SSs) in international capital flows have striking parallels in the early financial globalization era preceding World War I. All main capital-importing countries then faced episodic capital flow reversals averaging some 5 percent of GDP...

The aim of this paper is to evaluate the welfare gains from financial integration for developing and emerging market economies. To do so, we build a stochastic endogenous growth model for a small open economy that can (i) borrow from the rest of the world, (ii) invest in foreign assets, and...