International Financial Remoteness and Macroeconomic Volatility


Andrew K. Rose

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2008-01 | November 1, 2007

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.

Article Citation

Rose, Andrew K., and Mark M. Spiegel. 2008. “International Financial Remoteness and Macroeconomic Volatility,” Federal Reserve Bank of San Francisco Working Paper 2008-01. Available at

About the Author
Mark Spiegel
Mark Spiegel is a senior policy advisor in the Economic Research Department of the Federal Reserve Bank of San Francisco. Learn more about Mark Spiegel