Is Financial Globalization Beneficial?

TLDR

Financial globalization’s impact on developing countries is debated, with evidence that financial development promotes growth but its benefits depend on implementation. The lecture investigates why financial development is often absent despite its benefits and whether financial globalization can foster development when properly managed. It concludes that while financial development drives growth and financial globalization can promote development, the latter also risks severe financial crises that may negate its benefits.

Abstract

This lecture examines whether financial globalization is beneficial to developing countries by first examining the evidence on financial development and economic growth and concludes that financial development is indeed a key element in promoting economic growth. It then asks why if financial development is so beneficial, it often does not occur. It then goes on to examine whether globalization, particularly of the financial kind, can help encourage financial and economic development and argues that it can. However, financial globalization does not always work to encourage economic development because it often leads to devastating financial crises. The issue is thus not whether financial globalization is inherently good or bad, but whether it can be done right.