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Globalization and the (Mis)Governance of Nations

  • Blouin, Arthur

    (University of Warwick)

  • Ghosal, Sayantan

    (University of Warwick)

  • Mukand, Sharun

    (University of Warwick)

We analyze whether or not the globalization of capital, `disciplines' governments and improves gov- ernance. We demonstrate that globalization a ects governance, by increasing a country's vulnerability to sudden capital ight. This increased threat of capital ight can discipline governments and improve governance and welfare by placing countries in a `golden straitjacket'. However, globalization may also overdiscipline' governments { resulting in a perverse impact on governmental incentives that catalyzes mis)governance. Accordingly, the paper suggests a novel (and quali ed) role for capital controls. Finally, we provide some suggestive evidence consistent with the predictions from our theoretical framework.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/centres/cage/research/papers/69.2012_mukand.pdf
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Paper provided by Competitive Advantage in the Global Economy (CAGE) in its series CAGE Online Working Paper Series with number 69.

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Date of creation: 2011
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Handle: RePEc:cge:wacage:69
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Web page: http://www2.warwick.ac.uk/fac/soc/economics/research/centres/cage/

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  1. Frederic Mishkin, 2005. "Is Financial Globalization Beneficial?," NBER Working Papers 11891, National Bureau of Economic Research, Inc.
  2. Alberto Alesina & Roberto Perotti, 1996. "Budget Deficits and Budget Institutions," IMF Working Papers 96/52, International Monetary Fund.
  3. Stiglitz Joseph E., 2010. "Contagion, Liberalization, and the Optimal Structure of Globalization," Journal of Globalization and Development, De Gruyter, vol. 1(2), pages 1-47, December.
  4. Obstfeld, Maurice, 1998. "The Global Capital Market: Benefactor or Menace?," Center for International and Development Economics Research, Working Paper Series qt3kn3n2s8, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  5. Sharun Mukand, 1999. "Globalization and the "Confidence Game"," Discussion Papers Series, Department of Economics, Tufts University 9924, Department of Economics, Tufts University.
  6. Pavlova, Anna & Rigobon, Roberto, 2003. "Asset Prices and Exchange Rates," Working papers 4322-03, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  7. Sebastian Edwards, 1999. "How Effective Are Capital Controls?," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 65-84, Fall.
  8. Lawrence H. Summers, 2000. "International Financial Crises: Causes, Prevention, and Cures," American Economic Review, American Economic Association, vol. 90(2), pages 1-16, May.
  9. Glick, Reuven & Rose, Andrew K, 1998. "Contagion and Trade: Why are Currency Crises Regional," CEPR Discussion Papers 1947, C.E.P.R. Discussion Papers.
  10. Leonardo Bartolini & Allan Drazen, 1996. "When Liberal Policies Reflect External Shocks, What Do We Learn?," NBER Working Papers 5727, National Bureau of Economic Research, Inc.
  11. Shang-Jin Wei & Irina Tytell, 2004. "Does Financial Globalization Induce Better Macroeconomic Policies?," IMF Working Papers 04/84, International Monetary Fund.
  12. Besley, Timothy J. & Smart, Michael, 2002. "Does Tax Competition Raise Voter Welfare?," CEPR Discussion Papers 3131, C.E.P.R. Discussion Papers.
  13. Hongbin Cai & Daniel Treisman, 2005. "Does Competition for Capital Discipline Governments? Decentralization, Globalization, and Public Policy," American Economic Review, American Economic Association, vol. 95(3), pages 817-830, June.
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