A study into financial globalization, economic growth and (in)equality 2

A Study into Financial Globalization, Economic Growth and (In)Equality Fikret Čaušević A Study into Financial Globalization, Economic Growth and (In)Equality Fikret Čaušević School of Economics and Business University of Sarajevo Sarajevo, Bosnia and Herzegovina ISBN 978-3-319-51402-4 DOI 10.1007/978-3-319-51403-1 ISBN 978-3-319-51403-1 (eBook) Library of Congress Control Number: 2017933079 © The Editor(s) (if applicable) and The Author(s) 2017 This work is subject to copyright All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed The use of general descriptive names, registered names, trademarks, service marks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations Cover illustration: Mono Circles © John Rawsterne/patternhead.com Printed on acid-free paper This Palgrave Macmillan imprint is published by Springer Nature The registered company is Springer International Publishing AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland CONTENTS Introduction Financial Globalization and Economic Growth – Literature Review with Comments Global Economic Growth, Financial Openness, and Inequality: 1990–2014 29 The Fastest-Growing Economies and Financial Openness 47 Global Financial Openness in the Advanced, Emerging and Developing Countries: A Brief Overview 75 Financial Liberalization and Globalization: Theory and Facts Over the Last Three Decades 91 Concluding Remarks: Financial Openness, Economic growth and (In)Equalities in the World 115 Appendix: Financial Globalization, Economic Growth and (In)Equalities 121 Index 173 v LIST Fig 4.1 Fig 4.2 Fig 4.3 Fig 4.4 Fig 5.1 Fig 5.2 Fig 6.1 Fig 6.2 OF FIGURES China’s international investment position: 2004–2014 (in billions of US$) FDI and portfolio equity net capital flows to China: 2001–2014 (in billions of US$) Composition of China’s GDP by expenditures for 2006–2010 and 2011–2014 (left and right pie, respectively) (shares in percentage points; yearly averages for the periods) Total net FDI inflows to India and Brazil: 1980–2014 cumulative amounts for the periods: 1981–1990, 1991–2000, 2001–2010, and 2011–2014 – in billions of current US$ TOTAL measure of financial openness: (assets+liabilities)/ GDP for the advanced and developing countries –2001–2013 (in percentages) The international investment position and GDP of the United States: 1990–2014 Relative economic performance of the G-10 countries: 2000–2005 percentage change in the value of the growth coefficient for the G-10 countries and the threshold percentage change in the value of Cg distinguishing between relative and absolute economic decline Relative economic performance of the G-10 countries: 2005–2009 percentage change in the value of the growth coefficient for the G-10 countries and the threshold percentage change in the value of Cg distinguishing between relative and absolute economic decline 50 51 53 68 77 80 97 98 vii viii LIST OF FIGURES Fig 6.3 Relative economic performance of the G-10 countries: 2009–2014 percentage change in the value of the growth coefficient for the G-10 countries and the threshold percentage change in the value of Cg distinguishing between relative and absolute economic decline 99 LIST Table 3.1 Table 3.2 Table 3.3 Table 3.4 Table 3.5 Table 3.6 Table 3.7 Table 5.1 Table 5.2 Table Table Table Table Table Table A.1 A.2 A.3 A.4 A.5 A.6 OF TABLES Examples of how to calculate the growth coefficient (Cg) for 2000 Ten fastest-growing economies in the world: 1990–2000 Twenty fastest-growing economies in the world: 2000–2014 Average relative economic growth by continent: 1990-2000-2014 Average national income coefficient (Cni) based on GNI in US$ PPP by quartile and decile: World in 1990 Average national income coefficient (Cni) based on GNI in US$ PPP by quartile and decile: World in 2000 Average national income coefficient (Cni) based on GNI in US$ PPP by quartiles and deciles: World in 2014 The TOTAL measure of financial openness for EU (Eurozone) countries: 2001–2014 Percentage change in the growth coefficients and total banking sectors assets of Eurozone countries (including foreign branches and subsidiaries): 2014/2009 Growth coefficients – world 1990 top down Fastest growing economies in the period 1990–2000 Fastest growing economies in the period 2000–2009 Fastest growing economies in the period 2000–2014 Ranking by the size of growth coefficient in 2014 Fastest growing economies in the world: 2009–2014 30 33 36 39 41 42 44 86 87 121 126 130 135 139 144 ix x LIST OF TABLES Table A.7 Table Table Table Table A.8 A.9 A.10 A.11 Fastest growing economies in the 2000–2005 and 2005–2009 Fastest growing economies in the period 1990–2014 The national income coefficient (Cni): World in 1990 The national income coefficient (Cni): World in 2000 The national income coefficient (Cni): World in 2014 149 154 158 162 167 CHAPTER Introduction The thesis that financial liberalization is essentially beneficial for economic growth, particularly under conditions of increased globalization of financial markets and trade, was first put forward systematically in a number of articles in the early 1970s Their starting point was the assumption that financial liberalization and globalization would produce more efficient financial markets, because private financial institutions necessarily outperform state- or publicly owned ones, channelling resources more effectively towards projects with longer-term sustainability and higher rates of return and so fostering economic prosperity This thesis has never been without its detractors and seems to fit the facts at best only imperfectly The main purpose of this book is to test it To take just the most glaring example, China has been one of the five fastest-growing economies in the world for each of the last twentyfive years In 1978, Deng Xiaoping started the opening-up to international flows of goods, services, and capital and by the beginning of the current decade what had been one of the world’s poorest countries was its second largest economy.1 As a result, the most populous country in the world is now also one of its most important capital markets, with a share in world market capitalization up from just 1% in 2000 to more than 15% in early 2015 In the 2014–2015, there were four Chinese This book has been edited by a native English speaker, Desmond Maurer, MA, to whom I express my special thanks © The Author(s) 2017 F Čaušević, A Study into Financial Globalization, Economic Growth and (In)Equality, DOI 10.1007/978-3-319-51403-1_1 164 APPENDIX Table A 10 (continued) Country 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 Mauritius Cuba Brazil Lithuania Latvia Suriname South Africa Botswana St Lucia Algeria Panama Thailand Kazakhstan Grenada Costa Rica Montenegro Russian Federation Colombia Egypt, Arab Rep Jamaica Bulgaria Jordan Equatorial Guinea Dominican Republic Macedonia, FYR Tunisia Serbia Belarus Fiji St Vincent and the Grenadines Romania Dominica Swaziland Ecuador Belize Peru Guatemala Namibia El Salvador Bosnia and Herzegovina Indonesia National income coefficient Cni – 2000 1.172 1.148 1.133 1.124 1.070 1.028 1.008 1.001 0.987 0.982 0.981 0.946 0.940 0.935 0.916 0.911 0.872 0.856 0.820 0.814 0.812 0.810 0.803 0.791 0.788 0.766 0.758 0.756 0.749 0.747 0.746 0.746 0.729 0.715 0.701 0.656 0.649 0.641 0.639 0.628 0.557 APPENDIX 165 Table A 10 (continued) Country 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 Sri Lanka Albania Paraguay Turkmenistan Phillipines West Bank and Gaza Ukraine Tonga Mongolia Morocco Samoa Guyana Azerbaijan Bolivia Marshall Islands Yemen, Rep Cabo Verde China Bhutan Georgia Honduras Pakistan Nicaragua Congo, Rep Micronesia, Fed.Sts Armenia Kiribati Mauritania Cote d’Ivoire Vanuatu Sudan Vietnam India Nigeria Uzbekistan Zimbabwe Moldova Cameroon Timor-Leste Lao PDR Ghana National income coefficient Cni – 2000 0.556 0.546 0.542 0.523 0.517 0.489 0.485 0.485 0.482 0.462 0.449 0.440 0.439 0.438 0.416 0.384 0.382 0.378 0.374 0.353 0.351 0.346 0.342 0.340 0.340 0.312 0.304 0.288 0.287 0.279 0.274 0.272 0.262 0.256 0.253 0.248 0.246 0.234 0.234 0.232 0.229 (continued ) 166 APPENDIX Table A 10 (continued) Country 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 National income coefficient Cni – 2000 Djibouti Lesotho Kenya Zambia Kyrgyz Republic Senegal Papua New Guinea Solomon Islands Bangladesh Benin Nepal Gambia, The Comoros Eritrea Tanzania Madagascar Cambodia Mali Guinea Bissau Togo Tajikistan Guinea Burkina Faso Uganda Chad Sierra Leone Central African Republic Niger Rwanda Burundi Liberia Malawi Ethiopia Mozambique Congo, Dem.Rep Source: The author’s calculation based on World Bank data 0.226 0.223 0.221 0.219 0.203 0.196 0.181 0.180 0.175 0.170 0.165 0.156 0.153 0.151 0.148 0.148 0.138 0.134 0.134 0.133 0.118 0.116 0.108 0.106 0.103 0.102 0.087 0.080 0.079 0.076 0.070 0.064 0.064 0.056 0.054 APPENDIX 167 Table A 11 The national income coefficient (Cni): World in 2014 Country 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 Qatar Macao, SAR China Kuwait Singapore Norway Bermuda (2013) Luxembourg United Arab Emirates Switzerland Hong Kong, SAR China United States Saudi Arabia (2013) Netherlands Germany Austria Sweden Denmark Australia Canada Belgium Ireland Iceland (2013) Finland France Oman United Kingdom Japan Bahrain (2013) New Zealand Italy Korea, Rep Spain Israel Trinidad and Tobago (2013) Slovenia Czech Republic Portugal Estonia Slovak Republic Malta (2013) Greece (2013) National income coefficient Cni – 2014 8.750 8.207 5.855 5.455 4.562 4.524 4.459 4.428 4.020 3.845 3.799 3.587 3.323 3.229 3.225 3.188 3.183 3.035 3.015 2.998 2.913 2.804 2.760 2.726 2.701 2.687 2.591 2.571 2.461 2.388 2.287 2.280 2.264 2.190 2.063 1.956 1.929 1.869 1.863 1.846 1.840 (continued ) 168 APPENDIX Table A 11 (continued) Country 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 Lithuania Seychelles Malaysia Poland Puerto Rico (2013) Hungary Latvia St Kitts and Nevis Russian Federation Bahamas, The Kazakhstan Cyprus Antigua and Barbuda Chile Croatia Uruguay Romania Panama Turkey Equatorial Guinea Mauritius Lebanon Belarus Botswana Venezuela, RB (2013) Mexico Gabon Azerbaijan Suriname Bulgaria Iran, Islamic Rep.(2013) Libya Brazil Iraq Montenegro Thailand Turkmenistan Palau Costa Rica Algeria China National income coefficient Cni – 2014 1.796 1.676 1.668 1.661 1.651 1.629 1.590 1.535 1.530 1.515 1.476 1.469 1.451 1.448 1.422 1.374 1.356 1.334 1.331 1.267 1.233 1.206 1.197 1.186 1.180 1.159 1.153 1.150 1.146 1.144 1.109 1.088 1.080 1.042 1.036 1.018 0.987 0.974 0.945 0.920 0.895 APPENDIX 169 Table A 11 (continued) Country 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 Serbia Macedonia, FYR South Africa Colombia Dominican Republic Maldives Jordan Grenada Peru Mongolia Ecuador Egypt, Arab Rep Tunisia (2013) Albania St Vincent and the Grenadines Dominica Bosnia and Herzegovina St Lucia Sri Lanka Indonesia Namibia Jamaica Armenia Fiji Phillipines Ukraine Paraguay Swaziland Belize (2013) El Salvador Georgia Morocco Guatemala Bhutan Guyana (2013) Cabo Verde Bolivia Uzbekistan India Nigeria Samoa Moldova Vietnam National income coefficient Cni – 2014 0.886 0.881 0.863 0.857 0.846 0.845 0.810 0.800 0.783 0.763 0.757 0.750 0.749 0.746 0.731 0.716 0.715 0.715 0.705 0.697 0.682 0.587 0.579 0.571 0.569 0.549 0.545 0.536 0.522 0.521 0.510 0.510 0.497 0.494 0.447 0.429 0.416 0.397 0.391 0.386 0.381 0.374 0.363 (continued ) 170 APPENDIX Table A 11 (continued) Country 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 Tuvalu Tonga Congo, Rep Timor-Leste Pakistan West Bank and Gaza Lao PDR Marshall Islands Nicaragua Honduras Sudan Ghana Zambia Yemen, Rep (2013) Mauritania Micronesia, Fed.Sts Kiribati Bangladesh Cote d’Ivoire Kyrgyz Republic Lesotho Cambodia Vanuatu Sao Tome and Principe Cameroon Kenya Papua New Guinea Tajikistan Tanzania Nepal Senegal Chad Afghanistan Solomon Islands Benin South Sudan Sierra Leone Haiti Zimbabwe Uganda Mali Burkina Faso Gambia The National income coefficient Cni – 2014 0.360 0.357 0.349 0.346 0.345 0.340 0.333 0.319 0.317 0.300 0.271 0.269 0.262 0.254 0.251 0.244 0.241 0.227 0.227 0.219 0.215 0.208 0.207 0.201 0.200 0.197 0.189 0.179 0.169 0.164 0.158 0.145 0.137 0.137 0.137 0.124 0.123 0.119 0.117 0.114 0.111 0.110 0.108 APPENDIX 171 Table A 11 (continued) Country 169 170 171 172 173 174 175 176 177 178 179 180 181 182 National income coefficient Cni – 2014 Rwanda Ethiopia Comoros Guinea Bissau Madagascar Togo Guinea Mozambique Niger Burundi Malawi Congo, Dem.Rep Liberia Central African Republic Source: The author’s calculation based on World Bank data 0.104 0.102 0.099 0.097 0.095 0.089 0.078 0.078 0.064 0.054 0.053 0.048 0.047 0.041 INDEX A Africa, 38, 47, 65, 110 Agricultural Bank of China, the, 53 AIRB (Advanced Internal Rating Based), 102 Allianz, 54 American foreign liabilities, 80 Angola, 62–63, 71n43 AREAER (Annual Report on Exchange Arrangements and Exchange Restrictions), 13, 24n25 Armenia, 63–65 Asia, 3, 9, 38, 39, 65, 76, 110, 120 Assets, 2, 4, 11, 13, 14, 16, 21–23, 24n27, 35, 49, 53, 63, 75–80, 82, 84, 88, 89n4, 89n13, 96, 102, 104, 104–112, 119 Australia, 94 Austria, 37, 83, 88, 94, 95 Azerbaijan, 16, 33, 35–36, 43, 56–58 B Bahrain, 41 Baltic Europe, 16, 17 Bank-based financial system, 93 Bank of China, the, 53–55 Banking sector, 2, 4, 5n2, 16, 21–23, 53, 82–83, 88, 92, 104, 107–108, 118, 120 Bank for International Settlements (BIS), 16, 35 Bank of Shanghai, the, 54 Barclays, Basel Committee for Banking Supervision, the, 22, 108 Basel II, 4, 16, 21, 102 Basel III, 22, 101–104, 111 Belarus, 63–65 Belgium, 37, 94, 95, 98 Benabou, Roland, 103 Bermuda, 33, 34, 41 Bhutan, 65, 66 Big Government, BNP Paribas, 54 BoCom (the Bank of Communications), 54 Brazil, 67–68, 76 BRRD (the Bank Recovery and Resolution Directive), 22, 104 Brune and Guisinger FOI, the, 14 Brunei Darussalam, 41 Bulgaria, 38, 81, 83 Burkina Faso, 41 © The Author(s) 2017 F Čaušević, A Study into Financial Globalization, Economic Growth and (In)Equality, DOI 10.1007/978-3-319-51403-1 173 174 INDEX Burundi, 34, 41 Bush, G., 18 C Caballero, Ricardo, 106 Cambodia, 65 Canada, 60, 94, 95, 97, 99 Capital Requirement Directive IV, 102, 112n16 Capital/RWA ratio, the, 21 CEB, the (China Everbright Bank), 54 Central African Republic, 41 Chad, 65, 66 China, 1, 2, 9, 14, 19, 29, 34, 36, 41, 42, 43, 47–56, 58–61, 64–68, 76, 110, 115, 119 China Construction Bank, the, 53 Chinn-Ito index, the, 14, 48, 49, 57–59, 62, 81, 85 Citigroup, 54 Coefficient growth coefficient, the (Cg), 2, 3, 20, 29–31, 33–39, 43, 44, 47, 48, 55, 56, 58, 59, 61–63, 65, 67, 71n43, 80–81, 83–85, 88, 95, 97–99, 116 national income coefficient, the (Cni), 40–44 Commodity Futures Modernization Act, the, 15 Congo, DR, 33 Contaminated assets, 82, 102 Counter-cyclical measures, 13 CP-2, 15, 21 Credit activity, 4, 17, 22, 23 Croatia, 38, 81, 83 Cyprus, 37, 38, 64, 81, 85, 88, 94, 95 Czech Republic, 38, 81 D Darbar, Salim, 12 Deaton, Angus, 39–40 De facto financial openness, 9, 14, 18, 49, 57, 59, 60, 64, 76, 77, 82–85, 117 De facto measures of financial openness, 14, 19 De jure financial openness, 9, 17, 48, 57, 62, 67, 81 De jure measures of financial openness, 119 Demirguc-Kunt, Asli, 93, 94, 101 Democratic Republic of Congo, the, 34 Denmark, 37, 83, 84, 94, 95 Deutsche Bank, the, 4, 54, 102 Developed economies, 4, 8, 11, 16, 18, 56, 75, 93–101, 103, 106, 116 Developing economies, 19, 56, 75, 76, 108–112 Diversification financing, DJIA, the (Dow Jones Industrial Average), 55 Djibouti, 33 Dodd-Frank Act, the, 22, 102 E ECB, European Central Bank, 22, 23, 32, 85, 106–107, 118 Echeverria, Claudia, 12 Economic growth, 1–4, 7–25, 29–45, 47–62, 64–68, 75, 76, 80–88, 92–97, 99, 109–110, 115–120 relative economic growth, 29–31, 56, 59, 61, 84, 87, 88 INDEX Equatorial Guinea, 16, 33, 37, 48, 58–60 ESM, European Stability Mechanism, 86, 107–108 Estonia, 38, 81, 83, 88 Ethiopia, 34, 41, 65 EU 15, 3, 37, 80, 81, 83–84, 85, 88 EU 13, 38, 81, 83 Europe, 3, 4, 16, 17, 18, 23, 32, 35, 37, 38–39, 78, 82–83, 102, 109–110, 116, 120 European Single Act, the, 32 Eurozone, the, 18, 22, 23, 32, 35, 37, 45, 81, 86, 88, 102, 103, 106–108, 117 F Farhi, Emmanuel, 106 FDI (foreign direct investment) FDI stock, 57–59, 61, 65, 66 net FDI, 14, 50, 51, 52, 57–59, 61–64, 68 Fed, the, 78, 79, 85 Financial bubble, 50–51, 54–55 Financial globalization, 3, 4, 7–25, 42, 48, 57, 93–101 Financial innovations, 9, 11–12, 15, 16, 118 Financial instability hypothesis, 8, 11 Financial integration, 16, 63 Financial liberalization, 1–4, 7, 8, 10, 11, 13, 15, 16, 18, 20, 21, 32, 53, 54, 57, 58, 61, 78, 85, 91–113, 115–120 Financial openness, 9–11, 13–18, 20, 21, 23n4, 24n27, 29–45, 47–72, 75–90, 93, 115–120 Financial repression, 10, 15, 17, 49, 78, 92, 119 175 Financial systems, 4, 7, 8, 10, 11–12, 18, 93, 94, 104, 105, 108, 109, 115, 116, 118 Finland, 37, 87, 94, 95 first financial globalization, the, Forward guidance, 106 France, 23, 37, 45, 59, 61, 66, 83, 84, 94, 95, 100, 117, 118 G GDP (gross domestic product), 2, 3, 10, 14–16, 20–22, 29–31, 33–38, 44, 47, 49, 51–53, 55–67, 71n43, 75–77, 79–85, 87, 88, 94–101, 116, 117, 119, 120 Georgia, 33, 35 Germany, 19, 22, 37, 44, 50, 83, 85, 87, 88, 89n18, 94–96, 98–100, 117, 118 Glass-Steagall Act, the, 15, 101, 112n12 Global financial crisis, the, 37, 53, 102, 103, 106, 116 Global value chains, 56 GNI (gross national income), 40–44, 59 Goldman Sachs, 54 Goldsmith, William, 7, 92, 93 Gourinchas, Pierre-Olivier, 10 Governance structures, 54 Great recession, the, 37, 84, 102, 103, 117 Greece, 3, 37, 43, 84–87, 94, 95, 107, 117 Gross capital flows, 18, 63, 79, 83 Guarantee/equity swaps, 110 Guarantee funds, 108, 110, 111 for small open developing economies, 108, 110 176 INDEX H HDI (Human Development Index), 37, 56, 59, 62, 65 IHDI (inequality-adjusted human development index), 62, 65 Highly-sophisticated financial markets, 15 High quality liquid assets, 102, 108 Hong Kong, SAR China HSBC Holding, 54 Hungary, 38, 81, 83 I Iceland, 41, 94 IMF (the International Monetary Fund), 2, 11, 13, 54, 75, 76, 85, 86, 105, 106, 111 the IMF Board of Governors, 54 India, 29, 41–43, 47, 65–68, 76, 115, 119 Industrial and Commercial Bank of China, the, 53, 54 Internal controls, 48, 102–104 International Finance Corporation, the, 54 International investment position (IIP), 3, 49–50, 52, 57–60, 63, 69n7, 69n10, 75–76, 79–80, 82, 89n13, 96, 117 Internationally active banks, 3, 9, 20, 35, 96, 102, 116 IRB (Internal Ratings Based), 102 Irrational exuberance, 55, 79 Italy, 3, 21, 23, 37, 43, 83–85, 94–95, 98–99, 107, 117–118 J Japan, 35, 43, 55, 61, 64, 78, 95, 99, 102, 110 Jeanne, Olivier, 13 Jensen, Michael, 103 Johnston, Barry, 12 JP Morgan Chase&Co., K Ka_open index, the, 67, 78, 81 Kaminsky, Graciela, 15, 17 KAOPEN, the, 14 Kazakhstan, 16, 58, 61–62, 66 King, Mervyn, 104 Kiyotaki-Moore model, the, 96 Kiyotaki, Nobuhiro, 95–96 Korinek, Anton, 13 Kose, Ayhan, Kumhof, Michael, 113n23 Kuwait, 41 Kyrgyz Republic, 33 L Lane, Phillip, 14, 21 Lao PDR, 65 Latvia, 36–38, 81, 83, 88, 94 LCR (Liquidity Coverage Ratio), 102 Lerrick, Adam, 105–106 Levine, Ross, 93–94, 101 Liabilities, 12, 14, 20, 49, 63, 75–77, 79–80, 82, 84, 88, 89n4, 89n13, 95–96, 110–111 Liberia, 34 Libor, the, Liechtenstein, 33 Long-run or secular stagnation, 106 Lucas, Robert, 23n4 Luxembourg, 33, 34, 37, 41, 84–86, 87, 95 INDEX M Maastricht treaty, the, 32 Macao (SAR China), 36–37, 41–42, 94 Mainstream economics, Malawi, 34, 41 Malta, 38, 81 Managerial remuneration, 103 Managing expectations, 106 Market-based financial system (arm's length), 93, 94 McKinnon, Ronald, 7, 92 Meltzer, Allan, 105, 106 Mexico, 32, 76 Milesi-Ferretti, Gian Maria, 14, 21 Minsky, Hyman, 8, 10–11, 15, 17, 105 Mishkin, Frederic, 17–18 Moldova, 33 Monaco, 33, 34 Monetary policy transmission mechanism, the, 106 Mongolia, 60–61 Moore, John, 95–96 Mozambique, 34, 41 Mundell, Robert, 32 N Netherlands, the, 37, 61, 87, 94, 95, 98, 99, 100, 117, 118 Net international investment position (NIIP), 49, 63, 76, 79, 82, 83, 88, 100, 101, 117 New Classical (economics), 19 New Keynesian economics, 19 New Zealand, 94, 95 Niger, 41, 66 Norway, 34, 41, 94, 95 177 O Obstfeld, Maurice, 3, 8–9, 19, 21 Oman, 41 OTC-traded derivative contracts, 16 P PFAS (the pawnbroker for all seasons), 104–105 Poland, 38, 81–83 Portfolio investment debt portfolio investment, 61 equity portfolio investment, 50 Portugal, 37, 43, 84–86, 88, 94, 95, 107, 117 Prasad, Eswar, Public debt to GDP ratio, 88, 100 Q Quinn, Dennis, 14, 20 R Ranciere, Romain, 14 Redux model the Obstfeld-Rogoff Redux model, 19 Regulatory arbitrage, 9, 16, 96, 103, 116 Relative change in economic performance, 30 Relative economic standing, 2–4, 9, 16, 20, 21, 29, 31, 38, 43, 47, 48, 56, 58, 61, 62, 75, 81, 84, 87 Relative growth, 43, 58, 67 Rodrik, Dani, 10, 17, 20, 21 Rogoff, Kenneth, 9, 19 Romania, 38, 81, 83 178 INDEX Royal Bank of Scotland, Ruback, Richard, 103 Russia, 43, 64 Russian Federation, 33, 57, 58, 60 Rwanda, 34, 41 S Safe assets, 4, 104–112 Safe assets for small open developing economies, 110 Safety trap problem, the, 106 Saudi Arabia, 41 Schindler, Martin, 14 Schmukler, Sergio, 15, 17 Secondary capital markets, 107 Second Banking Directive, 102 Second financial globalization, the, 3, 8, 9, 11 Shanghai-Shenzhen CSI 300, the, 54–55 Shaw, Edward, 7, 92 Singapore, 41, 94 Single European Act, the, 102 Slovak Republic, 38, 81 Slovenia, 38, 81–83, 88, 94 South America, 38, 110 South-East Asia, 3, 9, 32, 76 South Korea, 55, 64, 94 Sovereign debt crisis, the, 103, 106–108, 116 Spain, 23, 37, 43, 84, 85, 88, 94, 95, 107, 108, 117, 118 Special Drawing Rights, the, 54, 119 Stability and Growth Pact, the, 32 Subramanian, Arvind, 10, 13, 17, 21 Swaziland, 33, 41, 48 Sweden, 21, 37, 83, 85, 94, 95, 97, 100 Switzerland, 33, 41, 95, 98, 100 T Taiwan Province of China, the, 76 Tajikistan, 33, 35, 65, 66 Taylor, Alan, 3, 8, Temin, Peter, 18 Tier 1, 102 Tier 2, 102 Tirole, Jean, 12, 103 TMT sector, 79 Tornell, Aaron, 14 TOTAL measure (of financial openness), 50, 77 Toyoda, Maria, 14, 20 Turkmenistan, 33, 35, 58 U UBS (the Union Bank of Switzerland), Uganda, 34, 41 Ukraine, 33 UNCTAD database, 51, 57, 58, 59–61 UNCTAD (United Nations Conference on Trade and Development), 51, 57, 58–61, 64, 66 UNDP (United Nations Development Program), 59 United Arab Emirates, the, 37 United Kingdom, the, 3, 15, 19, 22, 35, 37, 43, 48, 60, 61, 64, 66, 84, 94, 95, 97, 99, 100, 103, 116, 118 United States, the, 3, 15, 18, 19, 22, 32, 35, 37, 41, 43, 48, 50, 51, 55, 59–61, 66, 78–80, 91, 92, 94, 95, 97, 99, 100–103, 110, 116, 117 Uzbekistan, 63–65 INDEX V Vines, David, 18 W Wei, Shang-Jin, Westermann, Frank, 14 Western Europe, 3, 4, 16–18, 23, 35, 37, 83, 116, 120 William, Klein, 24n9 179 Williamson, John, 13 Woodford, Michael, 113n27 World Bank, the, 2, 3, 9, 11, 14, 16, 29, 31, 40, 51–52, 57–59, 61, 62, 64, 66, 67, 69n11, 75, 76, 111 Z Zero lower bound, 106 .. .A Study into Financial Globalization, Economic Growth and (In)Equality Fikret Čaušević A Study into Financial Globalization, Economic Growth and (In)Equality Fikret Čaušević School of Economics... countries A regression analysis comparing current account balances for 22 A STUDY INTO FINANCIAL GLOBALIZATION, ECONOMIC GROWTH the 20 05 20 08 and 20 08 20 12 revealed that most of the sample ran above... instability.6 2. 2 FINANCIAL GLOBALIZATION AND ITS EFFECTS In early 20 02, Maurice Obstfeld and Alan Taylor published their study on financial globalization’s impact on economic growth. 7 They compared