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Abstract

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.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.12.4.9
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 12 (1998)
Issue (Month): 4 (Fall)
Pages: 9-30

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Handle: RePEc:aea:jecper:v:12:y:1998:i:4:p:9-30

Note: DOI: 10.1257/jep.12.4.9
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Find related papers by JEL classification:

• F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
• D20 - Microeconomics - - Production and Organizations - - - General
• F30 - International Economics - - International Finance - - - General
• G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
• G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
• O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
• C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
• E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

References

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   • Obstfeld, Maurice, 1992. "Risk-Taking, Global Diversification, and Growth," CEPR Discussion Papers 688, C.E.P.R. Discussion Papers.
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8. Maurice Obstfeld, 1997. "Models of Currency Crises with Self-Fulfilling Features," NBER Working Papers 5285, National Bureau of Economic Research, Inc.
   
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10. Calvo, Guillermo A. & Mendoza, Enrique, 1997. "Rational Herd Behavior and the Globalization of Securities Markets," Working Papers 97-26, Duke University, Department of Economics.
    
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    • Maurice Obstfeld & Alan M. Taylor, 1999. "The Great Depression as a Watershed: International Capital Mobility over the Long Run," NBER Working Papers 5960, National Bureau of Economic Research, Inc.
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19. Eichengreen, Barry, 1990. "One Money for Europe? Lessons from the US Currency Union," Department of Economics, Working Paper Series qt6ks1k831, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    
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20. Collins, Susan M., 1996. "On becoming more flexible: Exchange rate regimes in Latin America and the Caribbean," Journal of Development Economics, Elsevier, vol. 51(1), pages 117-138, October.
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