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Liquidity vs. Efficiency in Liberalized International Financial Markets: a Warning to Developing Economies

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  • Paul Davidson

Abstract

Until 1973 the postwar international payments system was, in large measure,shaped by Keynes’s thesis that flexible exchange rates and free international capital mobilityare incompatible with global full employment and rapid economic growth in an era of multilateralfree trade (Felix, 1977-8). This resulted in a stable international monetary systemthat permitted the global economy to experience unparalleled economic growth and prosperitydespite widespread capital controls and international financial market regulations.Since 1973, the financial system has grown progressively more fragile with recurrent andincreasingly stressful international debt and currency liquidity crises threatening the stabilityof the global economy. JEL Classification: E12.

Suggested Citation

  • Paul Davidson, 2000. "Liquidity vs. Efficiency in Liberalized International Financial Markets: a Warning to Developing Economies," Brazilian Journal of Political Economy, Center of Political Economy, vol. 20(3), pages 191-211.
    • Handle: RePEc:ekm:repojs:v:20:y:2000:i:3:p:191-211:id:1002
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    Cited by:

    1. William C. Gruben & Darryl McLeod, 2001. "Capital account liberalization and disinflation in the 1990s," Center for Latin America Working Papers 0101, Federal Reserve Bank of Dallas.
    2. Daniela Magalhães Prates & Luiz Fernanda De Paula & Barbara Fritz, 2016. "Keynes At The Periphery: Currency Hierarchy And Challenges For Economic Policy In Emerging Economies," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42nd Brazilian Economics Meeting] 110, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

    More about this item

    Keywords

    Exchange rate regime; Market efficiency; uncertainty;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory

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