Publication

This paper discusses the implications of the opening up of national financial systems in the presence of financial market frictions for business cycle volatility. The authors demonstrate that stylized facts suggest that countries with more developed financial systems have lower business cycle volatility. Financial openness, however, has no strong impact on business cycle volatility. In their theoretical analysis, the authors find that the implications of opening up national financial markets for business cycle volatility are largely unaffected by the presence of financial market frictions.