Financial Globalization in Emerging Economies: Much Ado about Nothing?

Much Ado about Nothing? F inancial globalization (FG), understood as the deepening of cross-border capital flows and asset holdings, has become increasingly relevant for the developing world for a number of reasons, including the consequences of its changing composition on countries' balance sheets, its role in the transmission of global financial shocks, its benefits in terms of financial development, international risk, and business cycle smoothing, and the implication of all of the above for macroeconomic and prudential policies. In this paper, we focus on these issues from an empirical perspective, building on, updating, and refocusing the existing literature to characterize the evolution and implications of financial globalization in emerging economies.