IDEAS home Printed from https://ideas.repec.org/a/taf/revpoe/v26y2014i4p594-617.html
   My bibliography  Save this article

The Economics of Regulating Cross-border Finance: Two New Views

Author

Listed:
  • Kevin P. Gallagher

Abstract

For much of the 20th century the dominant view in macroeconomics was that cross-border finance needed to be regulated in order to balance the 'impossible trinity' first sketched by John Maynard Keynes in his two books on monetary theory. The dominant view in development economics during the same period was that cross-border capital flows need to be regulated for similar reasons but also to mobilize domestic resources for economic development. The view that capital mobility was something to be constrained fell out of favor in mainstream economics by the 1980s and 1990s. The experience of numerous financial crises in the past 20 years has spawned new economic theories that reintroduce the notion that cross-border finance can cause financial instability. One strand of new theory in this realm picks up from Ragnar Nurkse, Hyman Minsky, and others, and has become popular in many emerging market capitals and in the United Nations system. Another strand of new theory comes from modern welfare economics and is gaining ground in mainstream economics, central banks, and the Bretton Woods institutions. This paper examines these new breakthroughs and traces them to their origins in economic thought. Coupled with new econometric evidence on the efficacy of capital account regulation, the regulation of capital flows is justified now more than ever.

Suggested Citation

  • Kevin P. Gallagher, 2014. "The Economics of Regulating Cross-border Finance: Two New Views," Review of Political Economy, Taylor & Francis Journals, vol. 26(4), pages 594-617, October.
    • Handle: RePEc:taf:revpoe:v:26:y:2014:i:4:p:594-617
    DOI: 10.1080/09538259.2014.952904
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/09538259.2014.952904
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/09538259.2014.952904?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. -, 2003. "From capital surges to drought: seeking stability for emerging economies," Copublicaciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1783 edited by Eclac.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 215-268, November.
    3. Olivier Jeanne & Arvind Subramanian & John Williamson, 2012. "Who Needs to Open the Capital Account?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 5119, January.
    4. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
    5. Jeffrey M. Chwieroth, 2010. "Capital Ideas: The IMF and the Rise of Financial Liberalization," Economics Books, Princeton University Press, edition 1, number 9087.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kevin Gallagher, 2012. "The Global Governance of Capital Flows: New Opportunities, Enduring Challenges," Working Papers wp283, Political Economy Research Institute, University of Massachusetts at Amherst.
    2. Engel, Charles, 2016. "Macroprudential policy under high capital mobility: policy implications from an academic perspective," Journal of the Japanese and International Economies, Elsevier, vol. 42(C), pages 162-172.
    3. Ilene Grabel, 2013. "The Rebranding of Capital Controls in an Era of Productive Incoherence," Working Papers wp318, Political Economy Research Institute, University of Massachusetts at Amherst.
    4. Bilge Erten & Anton Korinek & José Antonio Ocampo, 2021. "Capital Controls: Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 59(1), pages 45-89, March.
    5. Philip Lane, 2013. "Financial Globalisation and the Crisis," Open Economies Review, Springer, vol. 24(3), pages 555-580, July.
    6. José Antonio Ocampo, 2015. "Capital Account Liberalization and Management," WIDER Working Paper Series wp-2015-048, World Institute for Development Economic Research (UNU-WIDER).
    7. Ocampo, José Antonio, 2011. "Macroeconomy for development: countercyclical policies and production sector transformation," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    8. Ilene Grabel, 2015. "The rebranding of capital controls in an era of productive incoherence," Review of International Political Economy, Taylor & Francis Journals, vol. 22(1), pages 7-43, February.
    9. Mr. Anton Korinek, 2011. "The New Economics of Capital Controls Imposed for Prudential Reasons+L4888," IMF Working Papers 2011/298, International Monetary Fund.
    10. Jeffrey M. Chwieroth & Timothy J. Sinclair, 2013. "How you stand depends on how we see: International capital mobility as social fact," Review of International Political Economy, Taylor & Francis Journals, vol. 20(3), pages 457-485, June.
    11. José Antonio Ocampo, 2017. "Resetting the International Monetary (Non)System," Books, Red Investigadores de Economía, number 2017-11, May.
    12. José Antonio Ocampo, 2015. "Capital account liberalization and management," WIDER Working Paper Series 048, World Institute for Development Economic Research (UNU-WIDER).
    13. Machinea, José Luis, 2010. "A crise financeira internacional: sua naturaleza e os desafios da política econômica," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), May.
    14. Chwieroth, Jeffrey & Walter, Andrew, 2020. "Great expectations, financialization and bank bailouts in democracies," LSE Research Online Documents on Economics 102749, London School of Economics and Political Science, LSE Library.
    15. Jeffrey M. Chwieroth, 2015. "Managing and transforming policy stigmas in international finance: Emerging markets and controlling capital inflows after the crisis," Review of International Political Economy, Taylor & Francis Journals, vol. 22(1), pages 44-76, February.
    16. Tölö, Eero, 2019. "Predicting systemic financial crises with recurrent neural networks," Bank of Finland Research Discussion Papers 14/2019, Bank of Finland.
    17. Dani Rodrik, 2018. "Populism and the economics of globalization," Journal of International Business Policy, Palgrave Macmillan, vol. 1(1), pages 12-33, June.
    18. Caruso, Alberto & Reichlin, Lucrezia & Ricco, Giovanni, 2019. "Financial and fiscal interaction in the Euro Area crisis: This time was different," European Economic Review, Elsevier, vol. 119(C), pages 333-355.
    19. Daisuke Ikeda & Toan Phan & Timothy Sablik, 2020. "Asset Bubbles and Global Imbalances," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, vol. 20, pages 1-4, January.
    20. Karen K. Lewis, 2011. "Global Asset Pricing," Annual Review of Financial Economics, Annual Reviews, vol. 3(1), pages 435-466, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:revpoe:v:26:y:2014:i:4:p:594-617. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CRPE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.