Liquidity vs. Efficiency in Liberalized International Financial Markets: a Warning to Developing Economies

Paul Davidson

Brazilian Journal of Political Economy, 2000, vol. 20, issue 3, 191-211

Abstract: Until 1973 the postwar international payments system was, in large measure,shaped by Keynes’s thesis that flexible exchange rates and free international capital mobilityare incompatible with global full employment and rapid economic growth in an era of multilateralfree trade (Felix, 1977-8). This resulted in a stable international monetary systemthat permitted the global economy to experience unparalleled economic growth and prosperitydespite widespread capital controls and international financial market regulations.Since 1973, the financial system has grown progressively more fragile with recurrent andincreasingly stressful international debt and currency liquidity crises threatening the stabilityof the global economy. JEL Classification: E12.

Keywords: Exchange rate regime; Market efficiency; uncertainty (search for similar items in EconPapers)
Date: 2000
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Chapter: Liquidity vs. Efficiency in Liberalized International Financial Markets: A Warning to Developing Economies (2007)
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