Several East Asian countries suffered a sudden stop, with massive and unexpected capital outflows, in 1997-98. Latin American countries, in spite of their more checketed financial past, were much less severely hit at the time (of course, several have had crises since). Why this asymmetry between...

This paper studies an economy in which financial integration increases world welfare in the presence of international policy coordination but decreases world welfare in its absence. This happens because financial integration enhances the impact of domestic government policies on foreigners,...