This paper provides a comprehensive review of the literature on the uses and costs of financial globalization for developing countries, which has grown rapidly in recent years through a variety of channels with widely varying and often conflicting results. While there is still little strong evidence of the benefits of broad liberalization of capital markets, a growing body of evidence in the financial literature suggests that liberalization of equity markets has significantly increased growth. Microeconomic evidence based on firm or industry data shows some benefits of financial integration and distortions from capital controls, but macroeconomic evidence does not provide clear conclusions. Some studies argue that financial globalization supports macroeconomic stability in developing countries, while others disagree. This paper attempts to provide a unified conceptual framework for organizing this extensive and growing literature, emphasizing newer approaches that focus on the indirect benefits of financial globalization for the development of the financial sector, institutions, governance, and macroeconomic stability. In essence, 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 important than the direct effects of capital accumulation or portfolio diversification. This perspective explains why research based on regression analyses of growth between countries has found no positive effects of financial globalization, suggesting new and potentially useful approaches.This paper provides a comprehensive review of the literature on the uses and costs of financial globalization for developing countries, which has grown rapidly in recent years through a variety of channels with widely varying and often conflicting results. While there is still little strong evidence of the benefits of broad liberalization of capital markets, a growing body of evidence in the financial literature suggests that liberalization of equity markets has significantly increased growth. Microeconomic evidence based on firm or industry data shows some benefits of financial integration and distortions from capital controls, but macroeconomic evidence does not provide clear conclusions. Some studies argue that financial globalization supports macroeconomic stability in developing countries, while others disagree. This paper attempts to provide a unified conceptual framework for organizing this extensive and growing literature, emphasizing newer approaches that focus on the indirect benefits of financial globalization for the development of the financial sector, institutions, governance, and macroeconomic stability. In essence, 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 important than the direct effects of capital accumulation or portfolio diversification. This perspective explains why research based on regression analyses of growth between countries has found no positive effects of financial globalization, suggesting new and potentially useful approaches.