Does Financial Globalization Induce Better Macroeconomic Policies

@inproceedings{Wei2004DoesFG,
  title={Does Financial Globalization Induce Better Macroeconomic Policies},
  author={Shang-Jin Wei and Irina Tytell},
  year={2004}
}
Monetary and fiscal policies around the world are in better shape today than two decades ago. This paper studies whether financial globalization has helped induce governments to pursue better macroeconomic policies (the "discipline effect"). The empirical tests have two innovations. First, we recognize potential endogeneity of the observed capital flows in a given country and employ an instrumental variable approach that relies on the autonomous (global) component of the capital flows. Second… CONTINUE READING

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