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Globalization of Capital Flows and the (In)Disciplining of Nations

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Listed:
  • Arthur Blouin
  • Sayantan Ghosal
  • Sharun W. Mukand

Abstract

We analyze whether or not the globalization of capital, 'disciplines' governments and improves governance. We demonstrate that globalization affects governance, by increasing a country's vulnerability to sudden capital flight. This increased threat of capital flight 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 qualified) role for capital controls. Finally, we provide some evidence consistent with the predictions from our theoretical framework.

Suggested Citation

  • Arthur Blouin & Sayantan Ghosal & Sharun W. Mukand, 2022. "Globalization of Capital Flows and the (In)Disciplining of Nations," Working Papers 2022_01, Business School - Economics, University of Glasgow.
    • Handle: RePEc:gla:glaewp:2022_01
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    References listed on IDEAS

    as
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    3. Besley, Tim & Smart, Michael, 2002. "Does Tax Competition Raise Voter Welfare?," CEPR Discussion Papers 3131, C.E.P.R. Discussion Papers.
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    More about this item

    Keywords

    Globalization; Governance; Capital Flight; Capital Controls; Discipline.;
    All these keywords.

    JEL classification:

    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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