Charles Calomiris

“Capital Flows, Financial Crises, and Public Policy”

Editors: Michael M. Weinstein

Abstract:
In this chapter, I'll lay out the principal facts and controversies surrounding international flows of capital and their attendant risks. I'll review the perspectives of economic historians and economists on the implications of capital mobility, both during the first wave of globalization (prior to World War I) and during the recent wave (since 1980). I'll emphasize changes over time - especially political changes - that have weakened the case for unfettered capital mobility and have made capital flows more controversial among economists today than in the past. Attention focuses on the role of foreign investment in emerging markets - developing economies whose governments have recently chosen the path of privatization, trade liberalization, and deregulation as a formula for promoting progress.

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