Financial Globalization, Economic Growth, and the Crisis of 2007-09

by Cline, William R.

• ISBN13: 9780881324990
• ISBN10: 088132499X
• Format: Paperback
• Copyright: 2010-04-30
• Publisher: Peterson Inst for Intl Economics

Summary

In the debate over globalization's economic implications, trade liberalization remains at the forefront of discussion, but in an important new book, award-winning author William Cline changes direction to focus on the overlooked but pertinent growth benefits of financial globalization. In a post-crisis environment, how dangerous is financial openness? Does the global financial crisis of 2007-2009 warrant major policy changes that affect the degree of financial openness? Through a chronological overview of the policy interventions implemented during the crisis, Cline--a noted financial expert--examines the role that the financial crisis will play in the construction of future policy and provides a comprehensive analysis of the relationship between financial globalization and economic growth. Cline asserts that financial globalization represents a significant factor in economic growth of emerging market economies.

Author Biography

William R. Cline has been a senior fellow at the Peterson Institute for International Economics since its inception in 1981 and has held a joint appointment at the Center for Global Development since 2002. During 1996-2001 while on leave from the Institute, he was deputy managing director and chief economist of the Institute of International Finance. His publications include Global Warming and Agriculture: Impact Estimates by Country (2007), The United States as a Debtor Nation (2005), Trade Policy and Global Poverty (2004), Trade and Income Distribution (1997), International Debt Reexamined (1995), International Economic Policy in the 1990s (1994), The Economics of Global Warming (1992), United States External Adjustment and the World Economy (1989), and International Debt: Systemic Risk and Policy Response (1984). He was senior fellow, Brookings Institution (1973-81); deputy director of development and trade research, Office of the Assistant Secretary for International Affairs, US Treasury Department (1971-73); Ford Foundation visiting professor in Brazil (1970-71); and lecturer and assistant professor of economics at Princeton University (1967-70).

Table of Contents

Preface	p. ix
Acknowledgments	p. xiii
Overview	p. 1
Research Context	p. 2
Key Analytical Issues	p. 4
Theoretical Expectations	p. 11
Empirical Literature	p. 13
Synthesis Estimates	p. 18
Quantifying Crisis Effects	p. 25
Quantifying Debt versus Equity Effects	p. 26
Implications of the 2007-09 Crisis	p. 28
Conclusion	p. 33
Covered Interest Parity as a Measure of Financial Openness	p. 37
Analogy to Gains from Trade	p. 39
Tests for Compositional Differences in Growth Impact of Financial Openness	p. 41
A Critical Survey of Literature	p. 45
Cross-Country Growth Regressions	p. 46
Theoretical and Calibrated Studies	p. 116
Diversification Gains and Consumption Smoothing	p. 119
Summary Surveys	p. 131
Conclusion	p. 142
Weighting Cross-Country Regression Results in Meta-Analysis	p. 145
Gourinchas-Jeanne Model of Gains from Financial Integration	p. 155
Gemini: A Simple Model of International Risk Sharing	p. 161
Potential Circularity in the Knack-Keefer Government Replication Variable	p. 161
Current Account Deficits and Growth	p. 167
The Impact of Financial Globalization on Growth: Country-Specific Estimates	p. 171
The Synthesis Approach	p. 172
Trends in Financial Openness	p. 173
Calibration	p. 180
Results for General Financial Openness	p. 183
Weighting Nonsignificant Model Estimates Results for Direct Investment Openness	p. 201
Comparison with Theoretical Expectations	p. 208
Conclusion	p. 213
Normalizing Model Coefficients for Synthesis Analysis	p. 217
Temporary versus Permanent Growth Acceleration in the Henry Model	p. 223
Degree of Correlation among Alternative Measures of Financial Openness	p. 229
The Financial Crisis of 2007-09 and Financial Globalization	p. 235
Evolution	p. 236
Causes	p. 238
Status by Late 2009	p. 240
Implications for Financial Openness in Emerging-Market Economies	p. 255
Conclusion	p. 260
Key Events and Policy Responses	p. 261
Causes of the Crisis	p. 279
Contemporary Policy Diagnoses from September 2008 to February 2009	p. 315
Economics of the Geithner Plan	p. 315
Financing Gaps, Reserves, and Official Finance in the Global Financial Crisis	p. 325
References	p. 333
Index	p. 345
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