Global Capital Markets
Integration, Crisis, and Growth

This book is an economic survey of international capital mobility from the late nineteenth century to the present.

Maurice Obstfeld (Author), Alan M. Taylor (Author)

9780521633178, Cambridge University Press

Hardback, published 19 February 2004

374 pages
22.9 x 15.2 x 2.5 cm, 0.72 kg

"Maurice Obstfeld and Alan Taylor have written a wonderful book that raises the academic bar...it is a coherent and comprehensive assessment covering all the issues...In short, there is no book out there to challenge the GCM and it should remain the market leader for some time to come."
Jeffrey G. Williamson, Journal of Economic Literature

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.

Part I. Preamble
Section 1. Global Capital Markets: Overview and Origins: 1. Theoretical benefits
2. Problems of supernational capital markets in practice
3. The emergence of world capital markets
4. The trilemma: capital mobility, the exchange rate, and monetary policy
Part II. Global Capital in Modern Historical Perspective
Section 2. Globalization in Capital Markets: Quantity Evidence: 5. The stocks of foreign capital
6 The size of international flows
7. The saving-investment relationship
8. Caveats: quantity criteria
Section 3. Globalization in Capital Markets: Price Evidence: 9. Real interest rate convergence
10. Exchange-risk free nominal interest parity
11. Purchasing power parity
12. Caveats: price criteria
13. Summary
Part III. The Political Economy of Capital Mobility
Section 4. Globalization in Capital Markets: A Long-Run Narrative: 14. Capital without constraints: the gold standard, 1870–1931
15. Crisis and compromise: depression and war, 1931–46
16. Containment then collapse: Bretton Woods, 1946–71
17. Crisis and compromise II: the floating era, 1971–99
18. Measuring financial integration using data on legal restrictions
Section 5. The Trilemma in History: 19. Methodology
20. Data sources
21. Stationarity of nominal interest rates
22. Empirical findings: pooled annual differences
23. Empirical findings: individual-country dynamics
24. Conclusion
Section 6. Sovereign Risk, Credibility and the Gold Standard: 25. Five suggestive cases
26. Econometric analysis
27. Conclusion
Part IV. Lessons for Today
Section 7. Uneven Rewards: 28. Foreign capital stocks: net versus gross
29. Foreign capital flows: rich versus poor
30. Foreign capital stocks: rich versus poor
31. Then: has foreign capital always been biased to the rich?
32. Now: have poor countries really liberalized their markets?
33. Variations in the types of capital flows
34. Summary
Section 8. Uneven Risks: 35. Open markets, crises and volatility
36. Crises, controls and economic performance
37. Contagion and self-fulfilling crises
38. Market failure, government failure and policy choices.

Subject Areas: Finance [KFF], Economic history [KCZ], International economics [KCL]