IDEAS home Printed from https://ideas.repec.org/h/spr/sprchp/978-3-030-14000-7_20.html
   My bibliography  Save this book chapter

Financial Globalization and Its Implications for Development

In: The Palgrave Handbook of Development Economics

Author

Listed:
  • Ricardo Ffrench-Davis

    (University of Chile)

  • Stephany Griffith-Jones

    (University of Sussex)

Abstract

Financial markets have, increasingly, taken the center of development objectives. This has been a major factor in the fast rise of financial activity, with finance taking the lead in economic globalization. There is increasing consensus that different aspects of a globalized economy have different effects on growth, investment and jobs. While there is agreement that trade has net positive effects on growth and jobs (though there are important issues about how trade liberalization is performed, degree of contribution to growth, and distribution of gains and losses), there is increasing evidence that, in contrast, capital account liberalization and unfettered capital flows, especially short-term and reversible ones, may have negative effects on growth, jobs and income distribution. Furthermore, the view emerged that excessive liberalization of the capital account, without regulation, may undermine rather than support trade growth. Economists concerned with maximizing growth and employment are increasingly concerned with the macroeconomic instability and harm that financial capital flows and ensuing currency crises pose as well as distortions, for example via instability of exchange rates, that deter growth and exports value-added. This chapter looks at the evolution of these ideas and the empirical evidence. It examines recent debates around capital account liberalization. The 2012 “institutional view” of the IMF is examined, which favors capital account regulations, and their contradiction with WTO and, especially bilateral trade deals. It calls for an aggiornamento of WTO and bilateral trade provisions. Focusing the analysis in emerging economies, this chapter examines why financial capital flows tend to be intrinsically pro-cyclical, overshooting in the boom and the bust. It discusses implications of structural heterogeneity among different economic agents which in combination with real macroeconomic instability, is regressive and depresses development, owing to negative effects on capital formation, quality of exports and jobs.

Suggested Citation

  • Ricardo Ffrench-Davis & Stephany Griffith-Jones, 2019. "Financial Globalization and Its Implications for Development," Springer Books, in: Machiko Nissanke & José Antonio Ocampo (ed.), The Palgrave Handbook of Development Economics, chapter 20, pages 697-726, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-14000-7_20
    DOI: 10.1007/978-3-030-14000-7_20
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:sprchp:978-3-030-14000-7_20. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.