Working Paper: NBER ID: w8846
Authors: Maurice Obstfeld; Alan M. Taylor
Abstract: The ebb and flow of international capital since the nineteenth century illustrates recurring difficulties, as well as the alternative perspectives from which policymakers have tried to confront them. This paper is devoted to documenting these vicissitudes quantitatively and explaining them. Economic theory and economic history together can provide useful insights into events of the past and deliver relevant lessons for today. We argue that theories of how international capital mobility has evolved must be understood within the framework of the basic policy trilemma constraining an open economy's choice of monetary regime.
Keywords: No keywords provided
JEL Codes: F2; F33; F36; F41; N10; N20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Adherence to the gold standard (E42) | increased capital mobility (F20) |
| Breakdown of the gold standard during the interwar period (F33) | decline in capital mobility (F21) |
| Abandonment of fixed exchange rate regimes (F33) | increased capital mobility (F20) |
| High capital mobility (F20) | constraints on domestic monetary policy (E52) |
| Historical context of capital mobility (F20) | political support for exchange rate stability or domestic monetary objectives (E63) |