Working Paper: NBER ID: w6559
Authors: Maurice Obstfeld
Abstract: This paper reviews the theoretical functions, history, and policy problems raised by the international capital market. The goal is to offer a perspective on both the considerable advantages the market offers and on the genuine hazards it poses, as well as on the avenues through which it constrains national policy choices. A duality of benefits and risks is inescapable in the real world of asymmetric information and imperfect contract enforcement. I argue, however, that in confronting the global capital market there is no reason to depart from conventional economic wisdom. The way to maximize net benefits is to encourage economic integration while attacking concomitant distortions and other unwanted side-effects at, or close to, their sources.
Keywords: No keywords provided
JEL Codes: F31; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased capital mobility (F20) | improved risk management (G38) |
| international borrowing (F34) | economic growth (O49) |
| excessive borrowing (F65) | financial crises (G01) |
| international capital market (G15) | effective insurance through risk pooling (G52) |