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Federal Reserve Bank of San Francisco
Working Paper Series
International financial remoteness and macroeconomic volatility
Andrew K. Rose
Mark M. Spiegel
Abstract

This paper shows that proximity to major international financial centers seems to reduce business cycle volatility. In particular, we show that countries that are further from major locations of international financial activity systematically experience more volatile growth rates in both output and consumption, even after accounting for domestic financial depth, political institutions, and other controls. Our results are relatively robust in the sense that more financially remote countries are more volatile, though the results are not always statistically significant. The comparative strength of this finding is in contrast to the more ambiguous evidence found in the literature.


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Andrew K. Rose & Mark M. Spiegel, International financial remoteness and macroeconomic volatility, Federal Reserve Bank of San Francisco, Working Paper Series 2008-01, 2007.
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Keywords: Business cycles
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