Soros on International Capital Markets and Developing Economies: Multiple Equilibria and the Role of Policy

Thomas Palley

Eastern Economic Journal, 2005, vol. 31, issue 3, 407-419

Abstract: George Soros' views on financial markets are complex and at odds with most of the economics profession, marking him as an intellectual iconoclast. This paper explores Soros' thinking about financial markets, with special emphasis on his views regarding the shortcomings of the current international financial system and its treatment of developing countries. His thinking on developing countries and the international financial system is represented in terms of a model of multiple equilibria. The model is then applied to analyze Brazil's current financial problems, and policies for escaping the current "bad" high interest rate equilibrium are explored. Soros' analysis of financial markets and Brazil's financial predicament are suggestive of how Brazil might escape its current high interest rate trap. More broadly, Soros' analysis of financial markets suggests a need for policy makers to reconsider how these markets operate, which may in turn result in rethinking the role and relevance of capital controls.

Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:eej:eeconj:v:31:y:2005:i:3:p:407-419

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