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A tale of two 'globalizations': capital flows from rich to poor in two eras of global finance

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Author Info
Moritz Schularick (Economics Department, Free University of Berlin, Germany)

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Abstract

In this paper we take a comparative look at the patterns of capital flows from rich to poor countries in two eras of financial globalization. The paper extends recent research on the developmental effects of international financial integration, long-term trends in capital mobility and 'globalization in historical perspective'. Analysing the patterns of international financial integration in the three decades of the classical gold standard and after 1990 we show that investment in developing countries was a central element of 19th century financial globalization, but plays only a minor role today. The Lucas paradox of capital failing to flow from rich to poor has grown much stronger. In historical perspective, today's financial globalization is marked by massive diversification flows between high-income economies and a relative marginalization of less-developed economies. Copyright © 2006 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/ijfe.302
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 11 (2006)
Issue (Month): 4 ()
Pages: 339-354
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Handle: RePEc:ijf:ijfiec:v:11:y:2006:i:4:p:339-354

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References listed on IDEAS
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  1. Reinhart, Carmen & Reinhart, Vincent, 2003. "Twin fallacies about exchange rate policy in emerging markets," MPRA Paper 13874, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  2. Alan M. Taylor, 2002. "A Century of Current Account Dynamics," NBER Working Papers 8927, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Sebastian Edwards, 2001. "Capital Mobility and Economic Performance: Are Emerging Economies Different?," NBER Working Papers 8076, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Paolo Mauro & Nathan Sussman & Yishay Yafeh, . "Emerging Market Spreads: Then Versus Now," IMF Working Papers 00/190, International Monetary Fund.
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  5. N. F. R. Crafts, 2000. "Globalization and Growth in the Twentieth Century," IMF Working Papers 00/44, International Monetary Fund.
  6. Gian Maria Milesi-Ferretti, & Philip R. Lane, 2003. "International Financial Integration," The Institute for International Integration Studies Discussion Paper Series iiisdp03, IIIS. [Downloadable!]
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  7. Ferguson, Niall & Schularick, Moritz, 2006. "The Empire Effect: The Determinants of Country Risk in the First Age of Globalization, 1880 1913," The Journal of Economic History, Cambridge University Press, vol. 66(02), pages 283-312, June. [Downloadable!]
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  8. Alan M. Taylor, 1996. "International Capital Mobility in History: The Saving-Investment Relationship," NBER Working Papers 5743, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Philip Lane & Gian Maria Milesi-Ferretti, 2001. "THE EXTERNAL WEALTH OF NATIONS: Measures of Foreign Assets and Liabilities For Industrial and Developing Countries," CEG Working Papers 20012, Trinity College Dublin, Department of Economics. [Downloadable!]
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  10. Hali J. Edison & Ross Levine & Luca Antonio Ricci & Torsten Sløk, 2002. "International Financial Integration and Economic Growth," IMF Working Papers 02/145, International Monetary Fund. [Downloadable!]
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  11. Kevin H. O'Rourke & Jeffrey G. Williamson, 2001. "Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650592.
  12. Michael D. Bordo & Barry Eichengreen & Douglas A. Irwin, 1999. "Is Globalization Today Really Different than Globalization a Hunderd Years Ago?," NBER Working Papers 7195, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May. [Downloadable!] (restricted)
  14. Pierre-Olivier Gourinchas & Olivier Jeanne, 2004. "The Elusive Gains from International Financial Integration," IMF Working Papers 04/74, International Monetary Fund. [Downloadable!]
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  15. Joshua Aizenman & Brian Pinto & Artur Radziwill, 2004. "Sources for Financing Domestic Capital -- Is Foreign Saving a Viable Option for Developing Countries?," NBER Working Papers 10624, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Tobin, James, 2000. "Financial Globalization," World Development, Elsevier, vol. 28(6), pages 1101-1104, June. [Downloadable!] (restricted)
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Cited by:
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  1. Moritz Schularick & Thomas Steger, 2006. "Does Financial Integration Spur Economic Growth? New Evidence from the First Era of Financial Globalization," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  2. repec:bep:glecon:7:2007:2:2 is not listed on IDEAS
  3. Niall Ferguson & Moritz Schularick, 2005. "The Empire Effect: Country Risk in the First Age of Globalization, 1880-1913," Economic History 0509002, EconWPA. [Downloadable!]
  4. Michael D. Bordo & Christopher M. Meissner, 2007. "Foreign Capital and Economic Growth in the First Era of Globalization," NBER Working Papers 13577, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Corinne Deléchat & Smita Wagh & Gustavo Ramirez & John Wakeman-Linn, 2009. "Sub-Saharan Africa's Integration in the Global Financial Markets," IMF Working Papers 09/114, International Monetary Fund. [Downloadable!]
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