EconPapers    
Economics at your fingertips  
 

The Center and the Periphery: Two Hundred Years of International Borrowing Cycles

Graciela Kaminsky

MPRA Paper from University Library of Munich, Germany

Abstract: A common belief in both academic and policy circles is that capital flows to the emerging periphery are excessive and ending in crises. One of the most frequently mentioned culprits is the cycles of monetary easing and tightening in the financial center. Also, many focus on the role of crises in the financial center, pointing to excess international borrowing predating crises in the financial center and global retrenchment in capital flows in its aftermath. I re-examine these views using a newly-constructed database on capital flows spanning two hundred years. Extending the study of capital flows to the first episode of financial globalization has two major advantages: During this episode, monetary policy in the financial center is constrained by the adherence to the Gold Standard, thus providing a benchmark for capital flow cycles in the absence of an active role of central banks in the financial centers. Second, panics in the financial center are rare disasters that need to be examined in a longer historical episode. I find that boom-bust capital flow cycles in the periphery are milder in the second episode of financial globalization when the financial center follows a cyclical monetary policy. Also, cyclical monetary policy in the financial center is far more pronounced in times of crises in the financial center, cutting short capital flow bonanzas in the periphery and injecting liquidity in the aftermath of the crisis.

Keywords: International borrowing cycles; systemic and idiosyncratic capital flow bonanzas (search for similar items in EconPapers)
JEL-codes: F3 F30 F34 F6 F65 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-his, nep-ifn and nep-opm
Date: 2017-10-22
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/82125/2/MPRA_paper_82125.pdf original version (application/pdf)

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:pra:mprapa:82125

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Series data maintained by Joachim Winter ().

 
Page updated 2017-11-18
Handle: RePEc:pra:mprapa:82125