Rethinking the Economics of Capital Mobility and Capital Controls

Thomas Palley

Working Papers from Political Economy Research Institute, University of Massachusetts at Amherst

Abstract: This Working Paper reexamines the issue of international financial capital mobility, which has become today’s economic orthodoxy. The policy discussion is often framed in terms of the impossible trinity. That framing distorts discussion by representing capital mobility as having equal significance with sovereign monetary policy and control over exchange rates. It also distorts discussion by ignoring possibilities for coordinated monetary policy and exchange rates, and for managed capital flows. The case for capital mobility rests on neo-classical economic efficiency arguments and neo-liberal political arguments. The case against capital mobility is based on Keynesian macroeconomic inefficiency arguments, neo-Walrasian market failure arguments, and neo-Marxian arguments regarding distortion of the social structure of accumulation. Close examination shows the case for capital mobility to be extremely flimsy. That points to the ideological dimension behind today’s policy orthodoxy.

Keywords: capital mobility; capital controls; impossible trinity (search for similar items in EconPapers)
JEL-codes: F00 F3 F32 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-pke
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Rethinking the economics of capital mobility and capital controls (2009)
Working Paper: Rethinking the Economics of Capital Mobilityand Capital Controls (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:uma:periwp:wp193

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