Financial Integration and Growth in a Risky World*
Journal of Monetary Economics, 2020, https://doi.org/10.1016/j.jmoneco.2019.01.022

Coeurdacier, N, Rey, H, Winant, P
Date Published: 2020 Coeurdacier, N. Rey, H and P. Winant, Financial Integration and Growth in a Risky World, Journal of Monetary Economics, Volume 112, June 2020, Pages 1-21.

Abstract:
We revisit the debate on the benefits of financial integration in a two-country neoclassical growth model with aggregate uncertainty. We account simultaneously for gains from a more efficient apital allocation and gains from risk sharing -|together with their interaction. Using global numerical methods allows us to do meaningful welfare comparisons along the transition paths. We find small gains from integration, even for riskier and capital scarce emerging economies. These countries import capital for efficiency reasons before exporting it for self -insurance, leading to capital flows and growth reversals along the transition. This opens the door to a richer set of empirical implications than
previously considered in the literature.



Citation:
Coeurdacier, N. Rey, H and P. Winant, Financial Integration and Growth in a Risky World, Journal of Monetary Economics, Volume 112, June 2020, Pages 1-21, https://doi.org/10.1016/j.jmoneco.2019.01.022

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*This material is based upon work supported by the European Research Council grant number 210584 on "Countries' external balance sheets, dynamics of international adjustment and capital flows"

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Also NBER working Paper 21817, CEPR Discussion Paper 11009
 
Replication materials:
Computer codes and documentation available at https://bitbucket.org/albop/finint/

For access to dolo: http://github.com/econforge/dolo.