@unpublished {66616,
	title = {Why Did Financial Globalization Disappoint?},
	year = {2008},
	note = {Download PDF},
	month = {Mar 1, 2008},
	abstract = {As Fischer had prophesied, there has been an explosion in empirical studies on the
consequences of financial globalization. But far from clinching the case for capitalaccount
liberalization, these studies paint quite a mixed and paradoxical picture.3 Kose, Prasad, Rogoff, and Wei (2006, hereafter KPRW), who provide perhaps the most detailed
and careful review of the literature, conclude that the cross-country evidence on the
growth benefits of capital-account openness is inconclusive and lacks robustness. They
argue that one should look for the gains not in enhanced access to finance for domestic
investment, but in indirect benefits that are hard to detect with macroeconomic data and
techniques (an argument which we will evaluate below). In another paper, Kose, Prasad
and Terrones (2003) find that consumption volatility actually rose (relative to output
volatility) in emerging market economies during the current era of financial
globalization{\textemdash}a finding that flatly contradicts theoretical expectations. Perhaps most
paradoxical of all are the findings of Prasad, Rajan, and Subramanian (2007, hereafter
PRS) and Gourinchas and Jeanne (2007), which throw cold water on the presumed
complementarity between foreign capital and economic growth: it appears that countries
that grow more rapidly are those that rely less and not more on foreign capital; and in
turn foreign capital tends to go to countries that experience not high, but low productivity
growth.},
	author = {Rodrik, Dani and Subramanian, Arvind}
}
