TY - BOOK ID - 84540796 TI - Does Financial Globalization Induce Better Macroeconomic Policies? AU - Wei, Shang-Jin. AU - Tytell, Irina. PY - 2004 SN - 1462307590 1451992491 1281239798 9786613777898 1451896824 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - International finance KW - Capital movements KW - Globalization KW - Global cities KW - Globalisation KW - Internationalization KW - International relations KW - Anti-globalization movement KW - Capital flight KW - Capital flows KW - Capital inflow KW - Capital outflow KW - Flight of capital KW - Flow of capital KW - Movements of capital KW - Balance of payments KW - Foreign exchange KW - International monetary system KW - International money KW - Finance KW - International economic relations KW - Econometric models. KW - Budgeting KW - Exports and Imports KW - Inflation KW - Public Finance KW - Price Level KW - Deflation KW - Debt KW - Debt Management KW - Sovereign Debt KW - International Investment KW - Long-term Capital Movements KW - National Budget KW - Budget Systems KW - Globalization: General KW - Macroeconomics KW - Public finance & taxation KW - International economics KW - Budgeting & financial management KW - Government debt management KW - Budget planning and preparation KW - Prices KW - Debts, Public KW - Budget KW - El Salvador UR - https://www.unicat.be/uniCat?func=search&query=sysid:84540796 AB - 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, we recognize inherent discreteness in defining good versus bad macroeconomic policies and use a transition matrix technique to determine whether capital flows are effective in inducing substantial qualitative policy shifts. Our results suggest that, in spite of the plausibility of the "discipline effect" in theory, it is not easy to find strong and robust causal evidence. There is some evidence that financial globalization may have induced countries to pursue low-inflation monetary policies. However, there is no evidence that it has encouraged low budget deficits. ER -