Globalization of Financial Markets and Implications for Pacific Basin Developing Countries

IMF Working Papers, March 1, 1991

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Globalization of Financial Markets and Implications for Pacific Basin Developing Countries

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Bibliographic details

• Authors: David John Goldsbrough, Ranjit S Teja
• Published: March 1, 1991
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451978780.001

Summary

• Paper analyses consequences of growing interdependence of world financial markets for Pacific developing countries.
• Sections:
  • Section I: discusses trends in financial integration in the Pacific and the underlying movements in saving and investment.
  • Section II: seeks to quantify the increased capital mobility, in terms of rate of return differentials and the degree of correlation between savings and investment rates across countries.
  • Section III: focuses on policy implications of increasing integration, including:
  • the effectiveness of macroeconomic policy instruments,
  • the usefulness of the current account as a target of policy,
  • the dangers of excessive taxation of financial intermediation.

Key findings and analytical focus

• Financial integration trends in the Pacific and associated movements in saving and investment are central to understanding impacts on Pacific developing countries.
• Quantification of increased capital mobility is approached via:
  • rate of return differentials,
  • degree of correlation between savings and investment rates across countries.
• Policy implications highlighted include:
  • reassessment of the effectiveness of macroeconomic policy instruments under higher financial integration,
  • evaluation of the current account’s usefulness as a policy target,
  • risks associated with excessive taxation of financial intermediation.

Subjects and keywords (as listed)

• Subjects: Balance of payments, Capital flows, Current account, Current account balance, Current account deficits, Financial services, Real interest rates
• Keywords: Australia and New Zealand, Capital flows, credit rationing, Current account, Current account balance, Current account deficits, equilibrium interest rate, financial market integration, government saving, gross investment, interest rate, investment data, nominal exchange rate, rate of return, Real interest rates, world interest rates, WP