Managing Global Financial Flows at the Cost of National Autonomy: China and India
AbstractThe narrative as well as the analysis of global imbalances in the existing literature are incomplete without the part of the story that relates to the surge in capital flows experienced by the emerging economies. Such analysis disregards the implications of capital flows on their domestic economies, especially in terms of the "impossibility" of following a monetary policy that benefits domestic growth. It also fails to recognize the significance of uncertainty and changes in expectation as factors in the (precautionary) buildup of large official reserves. The consequences are many, and affect the fabric of growth and distribution in these economies. The recent experiences of China and India, with their deregulated financial sectors, bear this out. Financial integration and free capital mobility, which are supposed to generate growth with stability (according to the "efficient markets" hypothesis), have not only failed to achieve their promises (especially in the advanced economies) but also forced the high-growth developing economies like India and China into a state of compliance, where domestic goals of stability and development are sacrificed in order to attain the globally sanctioned norm of free capital flows. With the global financial crisis and the specter of recession haunting most advanced economies, the high-growth economies in Asia have drawn much less attention than they deserve. This oversight leaves the analysis incomplete, not only by missing an important link in the prevailing network of global trade and finance, but also by ignoring the structural changes in these developing economies--many of which are related to the pattern of financialization and turbulence in the advanced economies.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_714.
Date of creation: Apr 2012
Date of revision:
Contact details of provider:
Web page: http://www.levyinstitute.org
Global Current Account Imbalances; Impossible Trinity; Capital Mobility; Official Reserves; Monetary Policy; National Autonomy; Efficient Market;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-08 (All new papers)
- NEP-MAC-2012-05-08 (Macroeconomics)
- NEP-PKE-2012-05-08 (Post Keynesian Economics)
- NEP-SEA-2012-05-08 (South East Asia)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Volz, Ulrich & Reade, J. James, 2011.
"Chinese Monetary Policy and the Dollar Peg,"
Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis
48740, Verein für Socialpolitik / German Economic Association.
- Thomas I. Palley, 2009.
"Rethinking the Economics of Capital Mobilityand Capital Controls,"
IMK Working Paper
01-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
- Thomas I. Palley, 2009. "Rethinking the Economics of Capital Mobility and Capital Controls," Working Papers wp193, Political Economy Research Institute, University of Massachusetts at Amherst.
- Patnaik, Ila & Shah, Ajay, 2010.
"Asia Confronts the Impossible Trinity,"
ADBI Working Papers
204, Asian Development Bank Institute.
- Ila Patnaik & Ajay Shah, 2010. "Asia confronts the impossible trinity," Macroeconomics Working Papers 22973, East Asian Bureau of Economic Research.
- Ila Patnaik & Ajay Shah, 2010. "Asia Confronts the Impossible Trinity," Macroeconomics Working Papers 22814, East Asian Bureau of Economic Research.
- Ajay Shah & Ila Patnaik, 2010. "Asia Confronts the Impossible Trinity," Working Papers id:2402, eSocialSciences.
- Patnaik, Ila & Shah, Ajay, 2010. "Asia confronts the impossible trinity," Working Papers 10/64, National Institute of Public Finance and Policy.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marie-Celeste Edwards).
If references are entirely missing, you can add them using this form.