Problems in the international financial system

Adrian Blundell-Wignall and Caroline Roulet

OECD Journal: Financial Market Trends, 2014, vol. 2014, issue 1, 99-121

Abstract: Since the 1980s OECD investment-saving correlations – as an inverse measure of economic openness – indicate a very wide disparity of openness between the OECD and emerging market economies (EMEs) with an absence of open markets in the latter. Given the increasing weight of EMEs in the world economy this pattern of growth with disparity of openness is ultimately unsustainable. This approach to development is not in the interests of EMEs in the post-crisis global environment. Various studies show how the absence of capital mobility inhibits development though private sector capital expenditure at the firm level. This paper generalises those findings in a panel study, showing that in the period since 2008 the increased presence of capital controls is associated with highly significant negative effects on business investment. It suggests that the world economy could be entering a more dangerous phase of potential instability that is not in the interests of either the advanced or the emerging world. There is scope for better policies to encourage more openness; the OECD Codes of Liberalisation could be an effective tool for managing the reform process.

Keywords: Capital controls; capital flows; exchange rate management; savings and investment; corporate capital expenditure; emerging market economies (EMEs) (search for similar items in EconPapers)
JEL-codes: C23 D22 E20 F21 F31 F43 G01 (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1787/fmt-2014-5jxzmkg91s0t (text/html)
Full text available to READ online. PDF download available to OECD iLibrary subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oec:dafkad:5jxzmkg91s0t

Access Statistics for this article

More articles in OECD Journal: Financial Market Trends from OECD Publishing Contact information at EDIRC.
Bibliographic data for series maintained by ().