Financial Openness and Business Cycle Volatility
Kiel Institute of World Economics Working Paper No. 1121
39 Pages Posted: 10 Aug 2002
Date Written: July 2002
Abstract
This paper discusses whether the integration of international financial markets affects business cycle fluctuations. In the framework of a new open economy macro-model, we show that the link between financial openness and business cycle volatility depends on the nature of the underlying shock. Empirical evidence supports this conclusion. Our results also show that the link between business cycle volatility and financial openness has not been stable over time.
Keywords: Open Economy Macroeconomics, Monetary union; Business cycles, Financial markets
JEL Classification: F33, F36, F41
Suggested Citation: Suggested Citation
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