Consumption Volatility and Financial Openness in the Developing World

While an increased level of financial integration has generally been observed across the world in recent years, the debate concerning how financial openness impacts on consumption volatility remains contentious. This study seeks to understand how financial sector policies affect fluctuations in private consumption, drawing on the experience of 15 developing countries that have undergone significant financial sector reforms. An understanding of the way financial openness impacts on consumption volatility is important in order to assess the costs and benefits associated with financial reform policies.