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Financial Integration and Growth in a Risky World

Nicolas Coeurdacier, Hélène Rey, Pablo Winant

NBER Working Paper No. 21817
Issued in December 2015, Revised in February 2019
NBER Program(s):The Asset Pricing Program, The International Finance and Macroeconomics Program

The debate on the benefits of financial integration is revisited in a two-country neoclassical growth model with aggregate uncertainty. Gains from more efficient capital allocation and gains from risk sharing are accounted for simultaneously|together with their interaction. Global numerical methods allow for meaningful welfare comparisons. Gains from integration are quantitatively small, even for riskier and capital scarce emerging economies. These countries import capital for efficiency reasons before exporting it for self-insurance, leading to capital ows and growth reversals along the transition. This opens the door to a richer set of empirical implications than previously considered in the literature.

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Document Object Identifier (DOI): 10.3386/w21817

Published: Nicolas Coeurdacier & Héléne Rey & Pablo Winant, 2019. "Financial Integration and Growth in a Risky World," Journal of Monetary Economics, .

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