Financial Globalization, Capital Account Liberalization and Risk Sharing

2012 ◽  
Author(s):  
Mayank Gautam
Keyword(s):  
Risk Sharing ◽  
Capital Account ◽  
Financial Globalization ◽  
Capital Account Liberalization

Financial Openness, Capital Flows and Risk Sharing in Africa

2015 ◽  
Vol 15 (1) ◽  
pp. 51-82
Author(s):  
John Bosco Nnyanzi
Keyword(s):  
Capital Markets ◽  
Capital Flows ◽  
Risk Sharing ◽  
Development Cooperation ◽  
Sub Saharan Africa ◽  
Empirical Literature ◽  
Capital Account ◽  
Capital Account Liberalization ◽  
Consumption Risk ◽  
Liberalization Policy

Empirical literature suggests that while there is low but improving risk sharing in developed countries, risk sharing in the developing countries is low and has remained low. We confirm this observation using panel data for the period 1986–2011. Overall we find weak evidence that an increase in capital account liberalization reduces the dependence of idiosyncratic consumption on idiosyncratic gross domestic product (GDP) in sub-Saharan Africa (SSA). An interaction of capital account liberalization proxy with capital flows produces a mixed effect on consumption risk sharing, calling for caution in capital account liberalization policy design. On the other hand, while we find no evidence that financial integration, as measured by cross-border capital flows in terms of the ratio of foreign assets to GDP, is helpful in consumption risk sharing in SSA, equity appears to hold the potential of precipitating a reduction in consumption risk while foreign direct investment (FDI) and debt are particularly noticeable to have a facilitative role in unhinging idiosyncratic consumption from idiosyncratic output in East African Community (EAC) and Southern African Development Cooperation (SADC) regional groupings, respectively. FDI liabilities in particular elicit a significantly positive enhancement of risk sharing in EAC and are economically meaningful in SADC. The impact of individual assets and liabilities is overall mixed, both in SSA and regional groupings, pointing to an underdeveloped capital markets scenario in need of urgent attention in terms of well-planned policies and strategies directed towards developing competitive capital markets in Africa for purposes of risk sharing.

scholarly journals Financial Globalization and Inequality

2021 ◽  
Vol 21 (4) ◽  
Author(s):  
Barry Eichengreen ◽  
Balazs Csonto ◽  
Asmaa ElGanainy ◽  
Zsoka Koczan
Keyword(s):  
Capital Flows ◽  
Product Market ◽  
Capital Account ◽  
Financial Globalization ◽  
Capital Account Liberalization ◽  
Distributional Effects ◽  
Institutional Conditions ◽  
Different Types ◽  
Context Specific ◽  
Distributional Impact

We review the debate on the association of financial globalization with inequality. We show that the within-country distributional impact of capital account liberalization is context specific and that different types of flows have different distributional effects. Their overall impact depends on the composition of capital flows, their interaction, and on broader economic and institutional conditions. A comprehensive set of policies – macroeconomic, financial and labor- and product-market specific – is important for facilitating wider sharing of the benefits of financial globalization.

scholarly journals Capital account liberalization and its effects on economic growth and financial instability: the exante orthodox models were wrong

2020 ◽  
Vol 40 (4) ◽  
pp. 669-688
Author(s):  
DIEGO GARCIA ANGELICO ◽  
GIULIANO CONTENTO DE OLIVEIRA
Keyword(s):  
Emerging Economies ◽  
Financial Crises ◽  
Empirical Studies ◽  
Financial Instability ◽  
Capital Account ◽  
Financial Globalization ◽  
Capital Account Liberalization ◽  
Multilateral Institutions ◽  
Theoretical Assumptions ◽  
The Subject

ABSTRACT The financial crises in emerging economies during the 1990s and 2000s propelled academia and multilateral institutions to investigate whether the promised benefits of capital account liberalization were being delivered or not. In the course of empirical studies on the subject, many ex ante theoretical assumptions on financial globalization were demystified, and previously unknown risks and dysfunctions began to be evidenced. This article analyzes the main empirical studies on the effects of financial globalization published in the last two decades and shows that the main conventional assumptions that were built to theoretically base the capital account liberalization processes that occurred in the 1980s and 1990s were wrong.

A MODEL OF CHINESE CAPITAL ACCOUNT LIBERALIZATION

2016 ◽  
Vol 21 (8) ◽  
pp. 1902-1934 ◽  
Author(s):  
Dong He ◽  
Paul Luk
Keyword(s):  
United States ◽  
Risk Sharing ◽  
The United States ◽  
Portfolio Diversification ◽  
Asset Market ◽  
Labor Income ◽  
Capital Account ◽  
International Risk Sharing ◽  
Capital Account Liberalization ◽  
Balance Sheets

We provide a theory-based inquiry into the contours of China's international balance sheets after the renminbi becomes convertible under the capital account. We construct a two-country general equilibrium model with trading in equities and bonds and calibrate the model with U.S. and Chinese data. We interpret Chinese capital account liberalization as a removal of restrictions that prohibit agents trading Chinese bonds and U.S. equities. We explore how international risk-sharing can be achieved through portfolio diversification in each of these asset market configurations. We also look at how these holdings would change as China gradually rebalanced its production with a larger share of labor income, and as the productivity gap between China and the United States narrowed. We find that both U.S. and Chinese residents would have incentives to increase their holdings in each other's equities and to issue debt in each other's currency.

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