Developing countries can benefit from globalization if they fix potential problems at home before opening their economies. Failing to do so can multiply local problems as money streams across borders, suggests ADBI research. For a number of reasons, developing countries might end up worse off if they allow their currencies to float freely and remove controls on money flowing in and out of their country before putting in place strong financial foundations.

Economists generally agree that imposing controls on capital flows acts as a tax on an economy. Those controls can make it harder for companies to find investors and for local investors to seek better returns for their money.

What’s more, greater integration into the global financial system means a developing economy is less exposed to any volatile growth swings at home.

Read the transcript

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Read the working paper

https://www.adb.org/publications/managing-financial-globalization-guide-developing-countries

Read the blog post

http://bit.ly/2GtrUiC

About the author

Shang-Jin Wei is a professor at Columbia University’s School of International and Public Affairs and Graduate School of Business.

Know more about ADBI’s work on global finance

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