NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Elusive Gains from International Financial Integration

Pierre-Olivier Gourinchas, Olivier Jeanne

NBER Working Paper No. 9684
Issued in May 2003
NBER Program(s):   IFM

Standard theoretical arguments tell us that countries with relatively little capital benefit from financial integration as foreign capital flows in and speeds up the process of convergence. We show in a calibrated neoclassical model that conventionally measured welfare gains from this type of convergence appear relatively limited for the typical emerging country. The welfare gain from switching from financial autarky to perfect capital mobility is roughly equivalent to a one percent permanent increase in domestic consumption for the typical emerging economy. This is negligible relative to the potential welfare gain of a take-off in domestic productivity of the magnitude observed in some of these countries.

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Document Object Identifier (DOI): 10.3386/w9684

Published: Gourinchas, Pierre-Olivier and Olivier Jeanne. "The Elusive Gains From International Financial Integration," Review of Economic Studies, 2006, v73(3,Jul), 715-741. citation courtesy of

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