Insuring against private capital flows: is it worth the premium? ; What are the alternatives?

Arbeitspapier

Following an analysis of the forces behind the global capital flows paradox” observed in the era of advancing financial globalization, this paper sets out to investigate the opportunity costs of self-insurance through precautionary reserve holdings. We reject the idea of reserves as low-cost protection against the vagaries of global finance. We also deny that arrangements giving rise to their rapid accumulation might be sustainable in the first place. Alternative policy options open to developing countries are explored, designed to limit both the risks of financial globalization and the costs of insurance-type responses. We propose comprehensive capital account management as an alternative to full capital account liberalization. The aims of a permanent regulatory regime of capital controls, with respect to both the aggregate size and the composition of capital flows, are twofold: first, to maintain sufficient macro policy space; second, to assure a good micro fit of external expertise incorporated in foreign direct investment as part of a country's development strategy.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 553

Classification and Topics

• Classification: Wirtschaft ; Interest Rates: Determination, Term Structure, and Effects ; Central Banks and Their Policies ; International Economic Order and Integration ; Current Account Adjustment; Short-term Capital Movements ; International Monetary Arrangements and Institutions ; International Institutional Arrangements
• Subject: International monetary order ; financial globalization ; capital flows ; financial crises ; capital controls ; foreign reserves

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bibow, Jörg
• Event: Veröffentlichung
• (who): Levy Economics Institute of Bard College
• (where): Annandale-on-Hudson, NY
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/31459
• Last update: 10.03.2025, 11:45 AM CET