Financial Integration, Globalization, Growth And Systemic Real Risk

Using data for a large number of advanced and emerging market economies during 1985- 2009, this paper documents the dynamics of financial integration and assesses whether advances in financial integration and globalization yield the beneficial real effects resulting from a more efficient resource allocation predicted by theory. The authors find that: (a) financial integration has progressed significantly worldwide, within regions, and particularly in emerging markets; (b) advances in financial integration and globalization predict higher growth, lower growth volatility, as well as lower probabilities of systemic real risk realizations.