Global financial integration and financial development opens the door to more external and domestic financing, higher growth, and broader risk diversification for governments, firms, and consumers in developing countries. However, they also entail risks and leave users exposed to the vagaries of financial markets.
The research program in this area examines issues related to financial globalization and financial development, for example, how they are linked, what drives them, the benefits and risks they entail, and how they affect growth and economic performance. The topics under study include capital flows, exchange rate policy, risk diversification, risk management, systemic risk, the propagation of financial shocks across countries, the macroeconomic effects of aid and debt forgiveness, the functioning of domestic and international financial institutions and markets, bank stability, access to finance, and financial crises.
The research is organized around five broad topics:
addresses a range of policy issues that arise as countries attempt to link more deeply with international financial markets, including the policy and institutional factors that shape the costs and benefits from integration, and the relation between international integration and domestic financial market development.
studies some of the main issues developing countries face when trying to improve the functioning of their financial system. For example, it analyzes what institutions and policies lead to higher financial development, how financial intermediaries behave and what incentives they face, how market function, the emergence of currency and maturity mismatches, and how firms can increase access to finance.
Financial crises and contagion
analyzes why financial crises happen and why they are transmitted within countries (across financial intermediaries and sectors) and across countries. For example, why was the Asian crisis transmitted to Russia, the US, and Latin America? And why has the US subprime problem generated a global financial crisis and economic collapse? Research in this area studies the origins of crises, the mechanisms through which they propagate, and the policies to manage and prevent them – including the role of debt and asset management for crisis vulnerability.
International capital flows
examines the factors driving the volume and composition of capital flows, the options available to governments for managing them, and their consequences for developing countries. Among the latter, particular attention is paid to international aid flows and debt forgiveness.
features research on the choice of exchange rate regime and its consequences for macroeconomic outcomes, the assessment of real exchange rate misalignment, and the possible use of the real exchange rate as a growth-promoting tool.
Policy Research Working Papers
For more policy research working papers from the World Bank's institutional archives, search here using author’s last name, title or working paper number (“wpsxxxx”).
|WPS6218||Sovereign defaults and expropriations : empirical regularities||Eden, Maya; Kraay, Aart; Qian, Rong||2012/10|
|WPS6209||How firms use domestic and international corporate bond markets||Gozzi, Juan Carlos; Levine, Ross; Martinez Peria, Maria Soledad; Schmukler, Sergio L.||2012/09|
|WPS6105||Financial globalization in emerging countries : diversification vs. offshoring||Ceballos, Francisco; Didier, Tatiana; Schmukler, Sergio L.||2012/06|
|WPS6072||On the international transmission of shocks : micro-evidence from mutual fund portfolios||Raddatz, Claudio; Schmukler, Sergio L.||2012/05|
|WPS6059||Should Wall-Street be occupied ? an overlooked price externality of financial intermediation||Eden, Maya||2012/05|
|WPS5993||Why do some countries default more often than others ? the role of institutions||Qian, Rong||2012/03|
|WPS5870||Consumption baskets and currency choice in international borrowing||Bengui, Julien; Nguyen, Ha Minh||2011/11|
|WPS5777||Engendering trade||Do, Quy-Toan; Levchenko, Andrei A.; Raddatz, Claudio||2011/08|
|WPS5768||Gross capital flows : dynamics and crises||Broner, Fernando; Didier, Tatiana; Erce, Aitor; Schmukler, Sergio L.||2011/08|
|WPS5700||Deconstructing herding : evidence from pension fund investment behavior||Raddatz, Claudio; Schmukler, Sergio L.||2011/06|
|WPS5605||Sudden stops and financial frictions : evidence from industry level data||Cowan, Kevin; Raddatz, Claudio||2011/03|
|WPS5524||Unexploited gains from international diversification : patterns of portfolio holdings around the world||Didier, Tatiana; Rigobon, Roberto; Schmukler, Sergio L.||2011/01|
|WPS5203||When the rivers run dry : liquidity and the use of wholesale funds in the transmission of the U.S. subprime crisis||Raddatz, Claudio||2010/02|
|WPS5174||Valuation effects with transitory and trend productivity shocks||Nguyen, Ha Minh||2010/01|
|WPS5056||The long and the short of emerging market debt||Opazo, Luis; Raddatz, Claudio; Schmukler, Sergio L.||2009/09|
|WPS4926||Optimal devaluations||Hevia, Constantino; Nicolini, Juan Pablo||2009/05|
|WPS4897||Emerging market fluctuations : what makes the difference ?||Hevia, Constantino||2009/04|
|WPS4872||Multilateral debt relief through the eyes of financial markets||Raddatz, Claudio||2009/03|