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Rethinking the Economics of Capital Mobilityand Capital Controls

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Author Info
Thomas I. Palley () (Economics for Democratic & Open Societies, Washington DC)
Abstract

This paper reexamines the issue of international financial capital mobility, which is today's economic orthodoxy. Discussion is often framed in terms of the impossible trinity. That framing distorts discussion by representing capital mobility as having equal significance with sovereign monetary policy and control over exchange rates. It also distorts discussion by ignoring possibilities for coordinated monetary policy and exchange rates, and for managed capital flows. The case for capital mobility rests on neo-classical economic efficiency arguments and neo-liberal political arguments. The case against capital mobility is based on Keynesian macroeconomic inefficiency arguments, neo-Walrasian market failure arguments, and neo-Marxian arguments regarding distortion of the social structure of accumulation. Close examination shows the case for capital mobility to be extremely flimsy, pointing to the ideological dimension behind today's policy orthodoxy.

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Publisher Info
Paper provided by IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute in its series IMK Working Paper with number 01-2009.

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Length: 42 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:imk:wpaper:01-2009

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Related research
Keywords: capital mobility; capital controls; impossible trinity.;

Find related papers by JEL classification:
F00 - International Economics - - General - - - General
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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This page was last updated on 2009-11-18.

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