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Author: Abdul G. Abiad Publisher: ISBN: Category : Languages : en Pages : 70
Book Description
Recent studies have found that capital moves quot;uphillquot; from poor to rich countries, and, when it does flow into poor economies, it brings little or no growth dividend. This stylization is emerging as a new orthodoxy, with predictive and normative implications. In this paper, we report that Europe provides a counterexample that supports a more conventional textbook perspective. As financial integration in Europe has increased, capital has traveled quot;downhillquot; with gathering strength from rich to poor countries. Moreover, these inflows have been associated with significant acceleration of income convergence. Although sympathetic to a view that growth dynamics may vary across countries and regions for deep historical and geographical reasons, we do search for an overarching explanation. We find that countries above certain thresholds in institutional quality and in financial integration itself tend to experience stronger downhill capital flows; thresholds have a less clear impact on income convergence. Europe, however, remains different even when allowing for thresholds. Europe's recent experience bears closer correspondence with intranational flows within the United States. That leads to two possibilities. First, more akin to an intranational setting, the European experience may have limited relevance for regions where borders still represent significant barriers. However, the threshold effects of financial integration point to a second, more intriguing possibility: the downhill flow of capital observed in a highly integrated Europe may well be the leading edge, the bellwether. With the increased diversification associated with integration, countries' incentives to self-insure - through high savings rates and postponed consumption - may become less compelling.
Author: Abdul G. Abiad Publisher: ISBN: Category : Languages : en Pages : 70
Book Description
Recent studies have found that capital moves quot;uphillquot; from poor to rich countries, and, when it does flow into poor economies, it brings little or no growth dividend. This stylization is emerging as a new orthodoxy, with predictive and normative implications. In this paper, we report that Europe provides a counterexample that supports a more conventional textbook perspective. As financial integration in Europe has increased, capital has traveled quot;downhillquot; with gathering strength from rich to poor countries. Moreover, these inflows have been associated with significant acceleration of income convergence. Although sympathetic to a view that growth dynamics may vary across countries and regions for deep historical and geographical reasons, we do search for an overarching explanation. We find that countries above certain thresholds in institutional quality and in financial integration itself tend to experience stronger downhill capital flows; thresholds have a less clear impact on income convergence. Europe, however, remains different even when allowing for thresholds. Europe's recent experience bears closer correspondence with intranational flows within the United States. That leads to two possibilities. First, more akin to an intranational setting, the European experience may have limited relevance for regions where borders still represent significant barriers. However, the threshold effects of financial integration point to a second, more intriguing possibility: the downhill flow of capital observed in a highly integrated Europe may well be the leading edge, the bellwether. With the increased diversification associated with integration, countries' incentives to self-insure - through high savings rates and postponed consumption - may become less compelling.
Author: Tamim A. Bayoumi Publisher: University of Michigan Press ISBN: 9780472108701 Category : Business & Economics Languages : en Pages : 178
Book Description
Globalization, financial deregulation, a single European currency . . . this book examines what all these changes mean for the world economy.
Author: Pierre-Olivier Gourinchas Publisher: ISBN: Category : Languages : en Pages : 47
Book Description
Standard theoretical arguments tell us that countries with relatively little capital benefit from financial integration as foreign capital flows in and speeds up the process of income convergence. We show in a calibrated neoclassical model that conventionally measured welfare gains from this type of convergence appear relatively limited for developing countries. The welfare gain from switching from financial autarky to perfect capital mobility is roughly equivalent to a 1 percent permanent increase in domestic consumption for the typical non-OECD country. This is negligible relative to the welfare gain from a take-off in domestic productivity of the magnitude observed in some of these countries.
Author: Abdul Abiad Publisher: International Monetary Fund ISBN: Category : Business & Economics Languages : en Pages : 42
Book Description
Recent studies conclude that the ongoing global financial integration may have had little or no value in advancing economic growth, especially in poor countries. Capital is often found to flow "uphill" from poor to rich countries. And, when it does flow into the less developed economies, it is negatively correlated with growth, calling into question the desirability of foreign capital. In this paper we report that Europe-including the new member states of the European Union-provides a counterexample to these global anomalies. With increasing financial integration, capital in Europe has traveled "downhill" from rich to poor countries, and has done so with gathering strength. These inflows have been associated with significant acceleration of income convergence.
Author: Branko Milanovi? Publisher: World Bank Publications ISBN: Category : Convergence (Economics) Languages : en Pages : 40
Book Description
Some economists have argued that the process of disintegration of the world economy between the two world wars led to income divergence between the countries. This is in keeping with the view that economic integration leads to income convergence. The paper shows that the view that the period 1919-39 was associated with divergence of incomes among the rich countries is wrong. On the contrary, income convergence continued and even accelerated. Since the mid-19th century, incomes of rich countries tended to converge in peacetime regardless of whether their economies were more or less integrated. This, in turn, implies that it may not be trade and capital and labor flows that matter for income convergence but some other, less easily observable, forces like diffusion of information and technology.
Author: Martin Feldstein Publisher: University of Chicago Press ISBN: 0226241807 Category : Business & Economics Languages : en Pages : 500
Book Description
Recent changes in technology, along with the opening up of many regions previously closed to investment, have led to explosive growth in the international movement of capital. Flows from foreign direct investment and debt and equity financing can bring countries substantial gains by augmenting local savings and by improving technology and incentives. Investing companies acquire market access, lower cost inputs, and opportunities for profitable introductions of production methods in the countries where they invest. But, as was underscored recently by the economic and financial crises in several Asian countries, capital flows can also bring risks. Although there is no simple explanation of the currency crisis in Asia, it is clear that fixed exchange rates and chronic deficits increased the likelihood of a breakdown. Similarly, during the 1970s, the United States and other industrial countries loaned OPEC surpluses to borrowers in Latin America. But when the U.S. Federal Reserve raised interest rates to control soaring inflation, the result was a widespread debt moratorium in Latin America as many countries throughout the region struggled to pay the high interest on their foreign loans. International Capital Flows contains recent work by eminent scholars and practitioners on the experience of capital flows to Latin America, Asia, and eastern Europe. These papers discuss the role of banks, equity markets, and foreign direct investment in international capital flows, and the risks that investors and others face with these transactions. By focusing on capital flows' productivity and determinants, and the policy issues they raise, this collection is a valuable resource for economists, policymakers, and financial market participants.
Author: Joshua Aizenman Publisher: ISBN: Category : Languages : en Pages : 39
Book Description
The accumulated experience of emerging markets over the past two decades has laid bare the tenuous links between external financial integration and faster growth, on the one hand, and the proclivity of such integration to fuel costly crises on the other. These crises have not gone without learning. During the 1990s and 2000s, emerging markets converged to the middle ground of the policy space defined by the macroeconomic trilemma, with growing financial integration, controlled exchange rate flexibility, and proactive monetary policy. The OECD countries moved much faster toward financial integration, embracing financial liberalization, opting for a common currency in Europe, and for flexible exchange rates in other OECD countries. Following their crises of 1997-2001, emerging markets added financial stability as a goal, self-insured by building up international reserves, and adopted a public finance approach to financial integration. The global crisis of 2008-2009, which originated in the financial sector of advanced economies, meant that the OECD "overshot" the optimal degree of financial deregulation while the remarkable resilience of the emerging markets validated their public finance approach to financial integration. The story is not over: with capital flowing in droves to emerging markets once again, history could repeat itself without dynamic measures to manage capital mobility as part of a comprehensive prudential regulation effort.
Author: Joshua Aizenman Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
Emerging market experience over the past two decades has revealed the tenuous links between external financial integration and faster growth, and the proclivity of such integration to fuel costly crises. Emerging markets learned, converging to the middle ground of the macroeconomic trilemma. Following their crises of 1997-2001, emerging markets added financial stability as a goal, self-insured by building up international reserves, and adopted a public finance approach to financial integration. The global crisis of 2008-09 illustrated that the advanced economies “overshot” the optimal degree of financial deregulation, while the resilience of the emerging markets validated their public finance approach to financial integration.
Author: Abdul G. Abiad
Author: Abdul G. Abiad
Author: Peter B. Kenen
Author: Tamim A. Bayoumi
Author: Pierre-Olivier Gourinchas
Author: Abdul Abiad
Author: Pierre-Olivier Gourinchas
Author: Branko Milanovi?
Author: Martin Feldstein
Author: Joshua Aizenman
Author: Joshua Aizenman