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International Capital Mobility in the 1990s

Listed author(s):
  • Maurice Obstfeld.

This paper surveys the performance of international capital markets and the literature on measuring international capital mobility. Three main functions of a globally integrated and efficient world capital market provide focal points for the analysis. First, asset-price arbitrage ensures that people in different countries face identical prices for a given asset. Second, to the extent that the usual market failures allow, people in different countries can pool risks to their lifetime consumption profiles. Third, new saving, regardless of its country of origin, is allocated toward the world's most productive investment opportunities. The paper evaluates the international capital market's performance of these roles by studying data on international interest-rate differences, international consumption correlations, international portfolio diversification, and the relations between national saving and investment rates. The conclusion is that while international capital mobility has increased markedly in the last two decades, international capital movements remain less free than intranational movements, even among the industrial countries.

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Paper provided by University of California at Berkeley in its series Center for International and Development Economics Research (CIDER) Working Papers with number C94-037.

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Date of creation: 01 May 1994
Handle: RePEc:ucb:calbcd:c94-037
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University of California at Berkeley, Berkeley, CA USA

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Web page: http://www.haas.berkeley.edu/groups/iber/wps/ciderwp.htm
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