In this lecture I document the proliferation of gross international asset and liability positions and discuss some consequences for individual countries’ external adjustment processes and for global ...financial stability. In light of the rapid growth of gross global financial flows and the serious risks associated with them, one might wonder about the continuing relevance of the net financial flow measured by the current account balance. I argue that global current account imbalances remain an essential target for policy scrutiny, for financial as well as macroeconomic reasons. Nonetheless, it is critically important for policymakers to monitor as well the rapidly evolving structure of global gross assets and liabilities.
This book presents an economic survey of international capital mobility from the late nineteenth century to the present. The authors examine the theory and empirical evidence surrounding the fall and ...rise of integration in the world market. A discussion of institutional developments focuses on capital controls and the pursuit of macroeconomic policy objectives in shifting monetary regimes. The Great Depression emerges as the key turning point in recent history of international capital markets, and offers important insights for contemporary policy debates. Its principal legacy is that the return to a world of global capital is marked by great unevenness in outcomes regarding both risks and rewards of capital market integration. More than in the past, foreign investment flows largely from rich countries to other rich countries. Yet most financial crises afflict developing countries, with costs for everyone.
Greater financial integration between core and peripheral European Monetary Union (EMU) members not only had an effect on both sets of countries but also spilled over beyond the euro area. Lower ...interest rates allowed peripheral countries to run bigger deficits, which inflated their economies by allowing credit booms. Core EMU countries took on extra foreign leverage to expose themselves to the peripherals. We present a stylized model that illustrates possible mechanisms for these developments.We then analyze the geography of international debt flows using multiple data sources and provide evidence that after the euro's introduction, core EMU countries increased their borrowing from outside of the EMU and their lending to the EMU periphery. Moreover, we present evidence that large core EMU banks' lending to periphery borrowers was linked to their borrowing from outside of the euro area.
A key precursor of twentieth-century financial crises in emerging and advanced economies alike was the rapid buildup of leverage. Those emerging economies that avoided leverage booms during the 2000s ...also were most likely to avoid the worst effects of the twenty-first century's first global crisis. A discrete-choice panel analysis using 1973–2010 data suggests that domestic credit expansion and real currency appreciation have been the most robust and significant predictors of financial crises, regardless of whether a country is emerging or advanced. For emerging economies, however, higher foreign exchange reserves predict a sharply reduced probability of a subsequent crisis. (JEL E44, F34, F44, G01, G21, O19)
Are discrepancies between national exports and imports ever a legitimate cause for government concern or intervention? The question is as old as economic theory itself. Sixteenth-century English ...writers deplored the drainage of precious metals implied by decits in foreign trade; as a result, the term balance of trade had entered into public discourse by the early seventeenth century. David Hume's account in 1752 of the price-specie-ow mechanism, arguably the greatest set piece of classical monetary economics, vanquished for many years the mercantilist position that the perpetual accumulation of external wealth was both desirable and feasible. More than 250 years later, however, the foreign trade imbalances of national units - including even some that share common currencies - still gure prominently in debates over economic policy.
International economics Krugman, Paul R; Obstfeld, Maurice; Melitz, Marc J
2018., 2018-02-08, 2019-07-22
eBook
For courses in International Economics, International Finance, and International Trade. A balanced approach to theory and policy applicationsInternational Economics: Theory and Policy provides ...engaging, balanced coverage of the key concepts and practical applications of the two main topic areas of the discipline. For both international trade and international finance, an intuitive introduction to theory is followed by detailed coverage of policy applications. With this new 11th Edition, the author team of Nobel Prize-winning economist Paul Krugman, renowned researcher Maurice Obstfeld, and Marc Melitz of Harvard University continues to set the standard for International Economics courses. Pearson MyLabTM Economics not included. Students, if Pearson MyLab Economics is a recommended/mandatory component of the course, please ask your instructor for the correct ISBN and course ID. MyLab Economics should only be purchased when required by an instructor. Instructors, contact your Pearson rep for more information.Pearson MyLab Economics is an online homework, tutorial, and assessment product designed to personalize learning and improve results. With a wide range of interactive, engaging, and assignable activities, students are encouraged to actively learn and retain tough course concepts.
This paper reviews the theoretical functions, history, and policy problems raised by the international capital market. The goal is to offer a perspective on both the considerable advantages the ...market offers and on the genuine hazards it poses, as well as on avenues through which it constrains national policy choices. A duality of benefits and risks is inescapable in the real world of asymmetric information and imperfect contract enforcement. The author argues, however, that, in confronting the global capital market, the way to maximize net benefits is to encourage economic integration while attacking concomitant distortions and unwanted side effects at, or close to, their sources.
The exchange-rate regime is often seen as constrained by the monetary policy trilemma, which imposes a stark tradeoff among exchange stability, monetary independence, and capital market openness. Yet ...the trilemma has not gone without challenge. Some argue that under the modern float there could be limited monetary autonomy; others, that even under the classical gold standard domestic monetary autonomy was considerable. This paper studies the coherence of international interest rates over more than 130 years. The constraints implied by the trilemma are largely borne out by history.
The rapid growth of international reserves, a development concentrated in the emerging markets, remains a puzzle. In this paper, we suggest that a model based on financial stability and financial ...openness goes far toward explaining reserve holdings in the modern era of globalized capital markets. The size of domestic financial liabilities that could potentially be converted into foreign currency (M2), financial openness, the ability to access foreign currency through debt markets, and exchange rate policy are all significant predictors of reserve stocks. Our empirical financial-stability model seems to outperform both traditional models and recent explanations based on external short-term debt.
Abstract
While the globalization of production has been a prominent target of anti-globalization backlash, globalized finance has seemed to be much less in the public bull’s-eye. The blueprint for ...the post-war international economy agreed at Bretton Woods in 1944 envisioned nothing like today’s extensive and fluid global capital market. The demise of the 1946–73 fixed exchange rate system, however, also brought a progressive dismantling of barriers to international financial flows motivated by special-interest politics, national economic competition, and ideology—alongside the benign desire for a more efficient international allocation of capital. Unfortunately, free cross-border financial capital mobility can compromise governments’ capacities to attain domestic economic and social goals in several ways. This essay links the dynamics of financial liberalization to the Teflon-like resilience of finance to backlash so far, and suggests that stronger backlash could emerge if national governments fail to enhance multilateral cooperation to manage the financial commons.
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