Federal Reserve Bank of Kansas City
Research Working Paper
Growth and Welfare Gains from Financial Integration Under Model Uncertainty
We build a robustness (RB) version of the Obstfeld (1994) model to study the effects of financial integration on growth and welfare. Our model can account for the empirically observed heterogeneity in the relationship between growth and volatility for different countries. The calibrated model shows that financial integration leads to significantly larger gains in growth and welfare for advanced countries than developing countries, with some developing countries experiencing growth and welfare loss in financial integration. Our analytical solutions help uncover the key mechanisms by which this happens.
Cite this item
Yulei Luo & Jun Nie & Eric R. Young, Growth and Welfare Gains from Financial Integration Under Model Uncertainty, Federal Reserve Bank of Kansas City, Research Working Paper RWP 18-12, 07 Dec 2018.
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
Keywords: Robustness; Model Uncertainty; Financial Integration; Risk Sharing; Economic Growth; Welfare
This item with handle RePEc:fip:fedkrw:rwp18-12
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