Global Capital Markets: Integration, Crisis, and Growth

Cover......Page 1
Half-title......Page 3
Series-title......Page 5
Title......Page 7
Copyright......Page 8
Dedication......Page 9
Contents......Page 11
List of Tables......Page 13
List of Figures......Page 15
Acknowledgments......Page 17
Part one Preamble......Page 21
1 Global Capital Markets: Overview and Origins......Page 24
1.1 Theoretical benefits......Page 25
1.1.1 International risk sharing......Page 26
1.1.2 Intertemporal trade......Page 28
1.1.3 Discipline......Page 29
1.2 Problems of supranational capital markets in practice......Page 30
1.2.2 Loss of policy autonomy......Page 31
1.2.3 International aspects of capital-market crises......Page 32
1.3 The emergence of world capital markets......Page 35
1.3.1 Early modern financial development......Page 37
1.3.2 Technological and institutional changes......Page 39
1.3.3 The rise of global finance......Page 43
1.3.4 Stylized facts for the nineteenth and twentieth centuries......Page 44
1.4 Trilemma: Capital mobility, the exchange rate, and monetary policy......Page 49
1.4.1 A brief narrative......Page 53
Part two Global Capital in Modern Historical Perspective......Page 63
2 Globalization in Capital Markets: Quantity Evidence......Page 66
2.1 The stocks of foreign capital......Page 69
2.1.1 The recovery of gross stocks......Page 71
2.2 The size of net international flows......Page 77
2.3 The saving-investment relationship......Page 81
2.3.1 The Feldstein-Horioka puzzle over time......Page 82
2.3.2 Intertemporal budget balance and current-account dynamics......Page 87
Capital flows and the LRBC in two centuries......Page 89
Current account dynamics and capital mobility......Page 90
Cross-country variation and the stylized facts......Page 93
A vector error-correction model of saving and investment......Page 96
Dynamic model parameters and FH regression implications......Page 97
2.4 Variations in the types of capital flows......Page 100
2.5 Caveats: Quantity criteria......Page 103
3.1 Exchange-risk-free nominal interest parity......Page 107
3.2 Real interest-rate convergence......Page 116
3.3 Purchasing power parity......Page 123
3.3.1 Data and preliminary analysis......Page 126
3.3.2 An overview of PPP in the twentieth century......Page 131
3.4 Caveats: Price criteria......Page 141
3.5 Summary......Page 142
Part three The Political Economy of Capital Mobility......Page 143
4.1.1 The classical gold standard era......Page 146
World War One and the return to gold......Page 149
Interwar exchange control......Page 152
4.2.1 Capital markets and the Great Depression......Page 156
4.2.2 Policy responses and the trilemma......Page 161
Wartime intensification of exchange control......Page 165
Capital mobility in the Bretton Woods blueprint......Page 167
4.3.1 Stability without integration......Page 171
4.3.2 Leakage, then deluge......Page 177
4.4.1 Integration without stability?......Page 180
4.4.2 The new global capital market......Page 182
4.5 Measuring integration using data on legal restrictions......Page 184
4.6 Summary......Page 188
5 Monetary Policy Interdependence and Exchange-Rate Regimes: Is the Trilemma Borne out by History?......Page 192
5.1 Measuring interest-rate interdependence......Page 194
5.2 Data sources......Page 197
5.3 Persistence of nominal interest rates......Page 200
5.4 Empirical findings: Pooled annual differences......Page 203
5.5 Empirical findings: Individual-country dynamics......Page 207
5.6 Summary......Page 213
6 The Changing Nature of Government Credibility: A Tale of Two Gold Standards......Page 215
6.1 Five suggestive cases......Page 220
6.2 Econometric analysis......Page 224
6.2.1 Prewar findings, 1870–1913......Page 229
6.2.2 Interwar findings, 1925–1931......Page 237
6.3 Summary......Page 244
Part four Lessons for Today......Page 247
7 Uneven Integration......Page 250
7.1 Foreign capital stocks: Net versus gross......Page 251
7.2 Foreign capital: Rich versus poor......Page 252
7.3 Has foreign capital always been biased toward the rich?......Page 263
7.4 How much have poor countries liberalized their markets?......Page 270
7.5 Summary......Page 277
8 Uneven Rewards and Risks......Page 279
8.1 Borrowing to finance capital accumulation......Page 280
8.2 The role of cost distortions......Page 285
8.3 Financial opening and economic performance......Page 291
8.4 The role of institutions......Page 299
8.5 Capital controls and growth......Page 305
8.6 Open markets, volatility, and crises......Page 308
8.7 Summary......Page 317
Saving, investment and the current account......Page 321
Exchange rates United Kingdom-Germany......Page 322
Interest rates United Kingdom-Germany......Page 323
Purchasing power parity......Page 324
Gold standard......Page 325
Yield......Page 328
Public debt......Page 330
Nominal GDP......Page 331
Government deficit as a fraction of GDP......Page 332
Default......Page 333
War......Page 334
Bibliography......Page 335
Index......Page 369