Is Kenneth Rogoff making an about-turn? The IMF research head's latest paper seems to back the views of fund critics.
Rogoff came out swinging when Joseph Stiglitz published Globalization and its Discontents. Rogoff tore into the former World Bank chief economist for saying that the Fund helped lay the groundwork for the Asian and Russian crises by forcing them to open up their markets too quickly.
In Effects of Globalization on Developing Countries, however, he seems to admit that Stiglitz might have a point.
"It has proven difficult to find robust evidence in support of the proposition that financial integration helps developing countries to improve growth," writes Rogoff. The paper finds theoretical support for the idea that financial integration should promote growth: it just can't find any evidence in the real world. Rogoff says:"while financial integration may open the door for additional capital to come in from abroad, it is unlikely to offer a major boost to growth by itself... if domestic governance is sufficiently weak, financial integration could cause an exodus of domestic capital and, hence, lower the growth rate of an economy."
Stiglitz couldn't have put it better himself.