This paper reevaluates the literature on the benefits and costs of financial globalization for developing countries. While the literature has grown significantly in recent years, it has been marked by diverse and often conflicting results. Although there is limited strong evidence supporting the increasing benefits of capital account liberalization, recent financial literature suggests that stock market liberalization significantly boosts growth. Microeconomic evidence based on firm- or industry-level data shows certain benefits of financial integration and distortive effects of capital controls, but macroeconomic evidence remains inconclusive. Meanwhile, some studies argue that financial globalization promotes macroeconomic stability in developing countries, while others claim the opposite. This paper attempts to provide a unified conceptual framework to organize this extensive and growing literature, emphasizing recent approaches to measuring the catalytic and indirect benefits of financial globalization. The paper argues that the indirect effects of financial globalization on the development of the financial sector, institutions, governance, and macroeconomic stability are far more significant than any direct effects through capital accumulation or portfolio diversification. This perspective explains the failure of studies based on regression analyses of growth between countries to find positive effects of financial globalization, directing attention to newer, potentially more useful and convincing approaches. Keywords: Capital account liberalization, Financial integration, Growth and volatility, Financial crises, Developing countries. JEL: F02, F21, F36, F4. The issue is of great practical relevance for policymakers in developing countries, not only because countries like China and India are still in early stages of financial globalization and face numerous decisions about the pace of further integration. Financial globalization is fascinating for researchers not only because of its significant implications for policy, but also because of the large variations in approaches and experiences across countries. Differences in the speed and approach to financial globalization have often been guided by philosophy, regional trends, political circumstances, as well as economic factors. Therefore, studies between countries on the effects of financial integration may potentially use a wide range of natural variations in experiences. Over the past decade, a massive literature on the effects of international financial globalization on growth and volatility has evolved from literally hundreds of published studies. Most of the literature is relatively young because the last wave of financial globalization has only recently begun in the mid-1980s. This research attempts to provide a synthesis and some perspectives on this rapidly growing literature, including both early contributions and recent studies. Although our general stance is that conclusions cannot be drawn from the literature, we find recent approaches that focus more on the indirect effects of financial globalization on productivity and GDP growth to be promising. At the same time, we find limited empirical support for the controversial claims that capital account liberalization (as opposed, for example, to inadequately rigid exchange rate regimes) is the key problem of most financial crises in developing countries in the last two decades. New approaches start from the standard neoclassical framework that has largely led the earlier wave of literature on financial globalization. This literature argues that the key benefit of financial globalization comesThis paper reevaluates the literature on the benefits and costs of financial globalization for developing countries. While the literature has grown significantly in recent years, it has been marked by diverse and often conflicting results. Although there is limited strong evidence supporting the increasing benefits of capital account liberalization, recent financial literature suggests that stock market liberalization significantly boosts growth. Microeconomic evidence based on firm- or industry-level data shows certain benefits of financial integration and distortive effects of capital controls, but macroeconomic evidence remains inconclusive. Meanwhile, some studies argue that financial globalization promotes macroeconomic stability in developing countries, while others claim the opposite. This paper attempts to provide a unified conceptual framework to organize this extensive and growing literature, emphasizing recent approaches to measuring the catalytic and indirect benefits of financial globalization. The paper argues that the indirect effects of financial globalization on the development of the financial sector, institutions, governance, and macroeconomic stability are far more significant than any direct effects through capital accumulation or portfolio diversification. This perspective explains the failure of studies based on regression analyses of growth between countries to find positive effects of financial globalization, directing attention to newer, potentially more useful and convincing approaches. Keywords: Capital account liberalization, Financial integration, Growth and volatility, Financial crises, Developing countries. JEL: F02, F21, F36, F4. The issue is of great practical relevance for policymakers in developing countries, not only because countries like China and India are still in early stages of financial globalization and face numerous decisions about the pace of further integration. Financial globalization is fascinating for researchers not only because of its significant implications for policy, but also because of the large variations in approaches and experiences across countries. Differences in the speed and approach to financial globalization have often been guided by philosophy, regional trends, political circumstances, as well as economic factors. Therefore, studies between countries on the effects of financial integration may potentially use a wide range of natural variations in experiences. Over the past decade, a massive literature on the effects of international financial globalization on growth and volatility has evolved from literally hundreds of published studies. Most of the literature is relatively young because the last wave of financial globalization has only recently begun in the mid-1980s. This research attempts to provide a synthesis and some perspectives on this rapidly growing literature, including both early contributions and recent studies. Although our general stance is that conclusions cannot be drawn from the literature, we find recent approaches that focus more on the indirect effects of financial globalization on productivity and GDP growth to be promising. At the same time, we find limited empirical support for the controversial claims that capital account liberalization (as opposed, for example, to inadequately rigid exchange rate regimes) is the key problem of most financial crises in developing countries in the last two decades. New approaches start from the standard neoclassical framework that has largely led the earlier wave of literature on financial globalization. This literature argues that the key benefit of financial globalization comes