Globalization and the New Normal

By Alina Carare, Bertrand Candelon, Jean-Baptiste Hasse, Jing Lu

April 6, 2018

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Alina Carare, Bertrand Candelon, Jean-Baptiste Hasse, and Jing Lu. Globalization and the New Normal, (USA: International Monetary Fund, 2018) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This study expands the empirical specification of Cerra and Saxena (2008), and allows short-term output growth regimes to be determined by globalization. Relying on a non-linear dynamic panel representation, it reconciles the earlier results in the literature regarding the two opposite narratives of the effects of globalization on output growth. Countries experience higher growth, on average, the more open and integrated they are into the world. However, once they reach a certain globalization threshold (endogenously estimated), countries may also experience a new normal, persistently lower short-term output growth following a financial crisis. The benefits, as well as vulnerabilities, accrue earlier in the globalization process for low- and middle-income countries. To solely reap the globalization benefits on growth, sound policies should be in place to mitigate the negative effects stemming from increased vulnerabilities brought by globalization.

Subject: Banking crises, Financial crises, Financial markets, Globalization, Production, Production growth, Stock markets

Keywords: Banking crises, Banking crisis, Financial crises, Global, Globalization, Globalization threshold, High-globalization regime, Index value, KOF globalization Index, New Normal, Output growth, Production growth, Stock markets, Trade globalization, WP

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/075
Stock No:

WPIEA2018075
ISBN:

9781484350645
ISSN:

1018-5941

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