DOES FINANCIAL GLOBALIZATION STILL SPUR GROWTH IN DEVELOPING COUNTRIES? CONSIDERING EXCHANGE RATE VOLATILITY

Brahim Gaies (1) , Stéphane Goutte (2) , Khaled Guesmi (1)

1 IPAG Business School
2 UP8 - Université Paris 8 Vincennes-Saint-Denis

This paper analyses the effects of financial globalization on growth in developing countries, focusing on its interaction with exchange rate volatility. Based on dynamic panel data models and the two-step system Generalized Method of Moments (system GMM) estimator, it replicates the method of Gaies et al. (2019a; 2019b) and extends it by exploring a new spillover effect of financial globalization in terms of exchange rate volatility measured by six different indicators. The findings show the positive influence of investment-globalization on growth through the traditional channel of capital accumulation and by reducing the negative impact of exchange rate volatility. These impacts are not ensured by indebtedness-globalization, thereby shedding light on the government's decision in developing countries on foreign capital control policy. These results are robust to changes in the estimator and variables used.

Mots clés: Government Policy; Foreign Investors; Dynamic Panel; Exchange Rate Volatility; Interactions

Domaines: Economies et finances; Applications [stat.AP]; Probabilités [math.PR]; Statistiques [math.ST]; Finance quantitative [q-fin.CP]; Pricing [q-fin.PR]; Econométrie de la finance [q-fin.ST]

Brahim Gaies, Stéphane Goutte, Khaled Guesmi. DOES FINANCIAL GLOBALIZATION STILL SPUR GROWTH IN DEVELOPING COUNTRIES? CONSIDERING EXCHANGE RATE VOLATILITY. 2019. ⟨halshs-02175361⟩