Global Capital Markets: Integration, Crisis, and Growth

by Maurice Obstfeld , Alan M. Taylor

• ISBN13: 9780521671798
• ISBN10: 0521671795
• Format: Paperback
• Copyright: 2005-09-05
• Publisher: Cambridge University Press

Summary

This book presents an economic survey of international capital mobility since the late nineteenth century. Governments face a fundamental macroeconomic policy trilemma which forces them to trade off among their conflicting goals, with natural implications for capital mobility. The present era of globalization can be seen, in part, as the resumption of a liberal world order established in the years from 1880-1914. The Great Depression emerges as the key turning point in the recent history of international capital markets and offers important insights for contemporary policy debates. More than in the past, foreign investment flows largely from rich countries to other rich countries. Yet the burden of financial crises falls most harshly on developing countries, with costs for everyone. Book jacket.

Author Biography

Maurice Obstfeld is the Class of 1958 Professor of Economics at the University of California, Berkeley Alan M. Taylor is Professor of Economics at the University of California, Davis

Table of Contents

List of Tables	xi
List of Figures	xiii
Acknowledgments	xv
Part One: Preamble	1	(42)
Global Capital Markets: Overview and Origins	4	(39)
Theoretical benefits	5	(5)
Problems of supranational capital markets in practice	10	(5)
The emergence of world capital markets	15	(14)
Trilemma: Capital mobility, the exchange rate, and monetary policy	29	(14)
Part Two: Global Capital in Modern Historical Perspective	43	(80)
Globalization in Capital Markets: Quantity Evidence	46	(41)
The stocks of foreign capital	49	(8)
The size of net international flows	57	(4)
The saving-investment relationship	61	(19)
Variations in the types of capital flows	80	(3)
Caveats: Quantity criteria	83	(4)
Globalization in Capital Markets: Price Evidence	87	(36)
Exchange-risk-free nominal interest parity	87	(9)
Real interest-rate convergence	96	(7)
Purchasing power parity	103	(18)
Caveats: Price criteria	121	(1)
Summary	122	(1)
Part Three: The Political Economy of Capital Mobility	123	(104)
Globalization in Capital Markets: A Long-Run Narrative	126	(46)
Capital without constraints: The gold standard, 1870--1931	126	(10)
Crisis and compromise: Depression and war, 1931--1945	136	(15)
Containment then collapse: Bretton Woods, 1946--1972	151	(9)
Crisis and compromise II: Floating rates since 1973	160	(4)
Measuring integration using data on legal restrictions	164	(4)
Summary	168	(4)
Monetary Policy Interdependence and Exchange-Rate Regimes	172	(23)
Measuring interest-rate interdependence	174	(3)
Data sources	177	(3)
Persistence of nominal interest rates	180	(3)
Empirical findings: Pooled annual differences	183	(4)
Empirical findings: Individual-country dynamics	187	(6)
Summary	193	(2)
The Changing Nature of Government Credibility	195	(32)
Five suggestive cases	200	(4)
Econometric analysis	204	(20)
Summary	224	(3)
Part Four: Lessons for Today	227	(74)
Uneven Integration	230	(29)
Foreign capital stocks: Net versus gross	231	(1)
Foreign capital: Rich versus poor	232	(11)
Has foreign capital always been biased toward the rich?	243	(7)
How much have poor countries liberalized their markets?	250	(7)
Summary	257	(2)
Uneven Rewards and Risks	259	(42)
Borrowing to finance capital accumulation	260	(5)
The role of cost distortions	265	(6)
Financial opening and economic performance	271	(8)
The role of institutions	279	(6)
Capital controls and growth	285	(3)
Open markets, volatility, and crises	288	(9)
Summary	297	(4)
Data Appendix	301	(14)
Bibliography	315	(34)
Index	349