Financial Globalization and Capital Flows Volatility Effects on Economic Growth

Abstract

Financial globalization has enhanced the interdependencies between worldwide economies and generated positive externalities both in emerging and developed economies encouraging their economic development. However, economic integration and globalization in the global macroeconomic environment has led to sharp increase of the dynamic of foreign flows between the countries, both commercial and financial flows. This paper aims to highlight that, during the current economic and financial crisis, financial globalization can cause a raise of capital flows volatility, which can have disturbing effects on the economic growth. The results will show the fact that, in times of macroeconomic imbalances, financial globalization is not a blessing for the economy, stimulating capital flows volatility and negatively influencing the economic development of the countries from Central and Eastern Europe (CEECs).