Large global financial imbalances need not be the harbinger of a world financial crash as many authors believe. Instead, we show that large and persistent global imbalances can be the outcome of financial integration when countries have different financial markets characteristics. In particular, countries with more advanced financial markets accumulate foreign liabilities vis-a-vis countries wi...

If there are benefits to international risk sharing, consumption growth variability should decrease following the liberalization of the equity market. In addition, markets with open equity markets should display lower consumption growth variability than closed markets, everything else equal. However, the recent literature on financial liberalization suggests that volatile capital flows lead to ...

Financial openness is often associated with higher rates of economic growth. We show that the impact of openness on factor productivity growth is more important than the effect on capital growth. This explains why the growth effects of liberalization appear to be largely permanent, not temporary. We attribute these permanent liberalization effects to the role financial openness plays in stock m...