The Great Depression as a Watershed: International Capital Mobility over the Long Run
AbstractThis paper surveys the evolution of international capital mobility since the late-nineteenth century. It begins with an overview of empirical evidence on the fall and rise of integration in the global capital market. A discussion of institutional developments focuses on the use of capital controls and the pursuit of domestic macroeconomic policy objectives in the context of changing monetary regimes. A fundamental macroeconomic policy trilemma has forced policy-makers to trade off conflicting goals. The natural implication of the trilemma is that capital mobility has prevailed and expanded under circumstances of widespread political support either for an exchange rate subordinated monetary policy regime (e.g. the gold standard), or for a monetary regime geared mainly towards domestic objectives at the expense of exchange rate stability (e.g. the recent float). Through its effect on popular attitudes towards both the gold standard and the legitimate scope for government macroeconomic intervention, the Great Depression emerges as the key turning point in the recent history of international capital markets.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1633.
Date of creation: Apr 1997
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Other versions of this item:
- Maurice Obstfeld & Alan M. Taylor, 1998. "The Great Depression as a Watershed: International Capital Mobility over the Long Run," NBER Chapters, in: The Defining Moment: The Great Depression and the American Economy in the Twentieth Century, pages 353-402 National Bureau of Economic Research, Inc.
- 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.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
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