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Capital Flows, Exchange Rates, and the New International Financial Architecture: Six Financial Crises in Search of a Generic Explanation

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  • Robert Aliber

Abstract

Exchange-rate history can be divided into two periods: the Bretton Woods period and the period of floating exchange rates since the early 1970s. In this second period, financial crises and the roles played by institutions, rules, and commitments in international finance have been of central importance. Many proposals for changing the international financial architecture have been presented to reduce the likelihood of crises, but the source of the problem is in variable capital flows and the floating exchange-rate system. Based on six major financial crises of the last 25 years, the wide range in movements in the exchange rate, which might also be inferred from differences in national inflation rates, reflects changes in the ex-ante cross-border capital flows. As long as currencies are floating, economic conditions among countries are likely to be more variable and diverse: the greater variability in economic conditions suggests greater variability in capital flows. Copyright Kluwer Academic Publishers 2000

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  • Robert Aliber, 2000. "Capital Flows, Exchange Rates, and the New International Financial Architecture: Six Financial Crises in Search of a Generic Explanation," Open Economies Review, Springer, vol. 11(1), pages 43-61, August.
    • Handle: RePEc:kap:openec:v:11:y:2000:i:1:p:43-61
    DOI: 10.1023/A:1008349205824
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    Cited by:

    1. Costantini, Mauro & Crespo Cuaresma, Jesus & Hlouskova, Jaroslava, 2014. "Can Macroeconomists Get Rich Forecasting Exchange Rates?," Department of Economics Working Paper Series 176, WU Vienna University of Economics and Business.
    2. Alberto Predieri, 2000. "New Financial Architectures and Legal Infrastructures: Toward a Corrected and Compensated International Monetary System," Open Economies Review, Springer, vol. 11(1), pages 205-234, August.

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