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International capital movements, speculation, and the 'conservation of saving' principle. A 'Harcourtian' interpretation of global imbalances and the global crisis

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  • Lilia Costabile

    (University of Naples Federico II, Italy)

Abstract

This paper is inspired by the contributions made by Geoff Harcourt concerning the macroeconomics of open economies, international capital movements and speculation (e.g. Harcourt 1994, Dalziel/Harcourt 1997). This conceptual frame- work is developed in a simple model, useful for validating some of Harcourt’s policy proposals for open economies, as well as for interpreting global imbalances and the global crisis. More specifically, this paper describes the workings of two economies, Home and the Rest of the World (RoW), which are related through both trade and capital flows. On this basis, this article: (i) develops the relationship between income levels in a deficit country (Home) and in a partner country (RoW); (ii) studies the role of key parameters in the two countries’ main macroeconomic functions; (iii) applies the main results to global imbalances and in particular to the US, which plays the role of Home in the present context; (v) suggests a possible link between global imbalances, speculation, and the international role of the dollar; (vi) proposes an enlarged version of Harcourt’s 'modest proposal for taming speculators'.

Suggested Citation

  • Lilia Costabile, 2011. "International capital movements, speculation, and the 'conservation of saving' principle. A 'Harcourtian' interpretation of global imbalances and the global crisis," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 8(1), pages 201-217.
    • Handle: RePEc:elg:ejeepi:v:8:y:2011:i:1:p201-217
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    References listed on IDEAS

    as
    1. Shang-Jin Wei & Xiaobo Zhang, 2011. "The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China," Journal of Political Economy, University of Chicago Press, vol. 119(3), pages 511-564.
    2. Philip R. Lane & Gian Maria Milesi-Ferretti, 2007. "A Global Perspective on External Positions," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 67-102, National Bureau of Economic Research, Inc.
    3. G. C. Harcourt, 1995. "Capitalism, Socialism and Post-Keynesianism," Books, Edward Elgar Publishing, number 206.
    4. G. C. Harcourt, 2008. "The Structure of Post-Keynesian Economics," Palgrave Macmillan Books, in: Mathew Forstater & L. Randall Wray (ed.), Keynes for the Twenty-First Century, chapter 0, pages 185-197, Palgrave Macmillan.
    5. Michael Dooley & David Folkerts‐Landau & Peter Garber, 2009. "Bretton Woods Ii Still Defines The International Monetary System," Pacific Economic Review, Wiley Blackwell, vol. 14(3), pages 297-311, August.
    6. Lilia Costabile, 2010. "The International Circuit of Key Currencies and the Global Crisis: Is there Scope for Reform?," Working Papers wp220, Political Economy Research Institute, University of Massachusetts at Amherst.
    7. Philip R. Lane & Gian Maria Milesi-Ferretti, 2007. "A Global Perspective on External Positions," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 67-102, National Bureau of Economic Research, Inc.
    8. Ansgar Belke & Daniel Gros, 2010. "Global Liquidity, World Savings Glut and Global Policy Coordination," Discussion Papers of DIW Berlin 973, DIW Berlin, German Institute for Economic Research.
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    Keywords

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    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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