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Financial Globalization: Unequal Blessings
Author(s) -
De La Torre Augusto,
Yeyati Eduardo Levy,
Schmukler Sergio L.
Publication year - 2002
Publication title -
international finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.458
H-Index - 39
eISSN - 1468-2362
pISSN - 1367-0271
DOI - 10.1111/1468-2362.00100
Subject(s) - exchange rate flexibility , globalization , economics , liberian dollar , currency , financial integration , flexibility (engineering) , imperfect , asset (computer security) , international finance , financial globalization , financial asset , value (mathematics) , financial market , exchange rate , developing country , finance , international economics , monetary economics , exchange rate regime , market economy , management , linguistics , philosophy , computer security , machine learning , computer science , economic growth
This paper presents a framework to analyse financial globalization. It argues that financial globalization needs to take into account the relation between money (particularly in its role as store of value), asset and factor price flexibility, and contractual and regulatory institutions. Countries that have the ‘blessed trinity’ (international currency, flexible exchange rate regime, and sound contractual and regulatory environment) can integrate successfully into the (imperfect) world financial markets. Developing countries, though, normally display the ‘unblessed trinity’ (weak currency, fear of floating, and weak institutional framework). The paper defines and discusses two alternative avenues (a ‘dollar trinity’ and a ‘peso trinity’) for developing countries to safely embrace international financial integration while the blessed trinity remains beyond reach.