Financial Globalisation (The Economist)

Back in 2003 IMF economists could find "no robust proof that financial globalisation always helped countries to grow more quickly." They are now more precise about where the benefits come from, for instance, from the learning experience of being exposed to more sophisticated international markets and practices:

"Thanks to...'financial deepening', open countries enjoy bigger, more liquid stockmarkets and a lower cost of equity. They also benefit from more sophisticated banking. Foreign lenders are often stronger and better run than their local rivals. They introduce new products and know-how and they give dissatisfied depositors somewhere else to take their custom, forcing local banks to raise their game. Moreover, foreign banks accustomed to sound regulation, prudent oversight and honest accounting in their home countries may lobby for the same things abroad."

As the article also points out, not all countries may be ready for financial globalisation:

"... foreign capital can also make mischief in countries that are not ready for it. Overseas investors show little mercy to countries where public spending gets out of hand, the currency gets out of line, the banks are poorly supervised or companies rip off outside owners. Mr Prasad thus lays out several “thresholds” that emerging economies should cross before they open up. What are they? A country's financial system should be quite sophisticated, he says; its companies fairly well run; and its macroeconomic policies reasonably disciplined."