Skip to main content Accessibility help

We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.

Close cookie message
×
Hostname: page-component-cd9895bd7-p9bg8 Total loading time: 0 Render date: 2024-12-24T00:56:16.567Z Has data issue: false hasContentIssue false

18 - International Finance

from Part II - Factors Governing Differential Outcomes in the Global Economy

Published online by Cambridge University Press:  03 June 2021

By
Barry Eichengreen  and
Rui Pedro Esteves
Edited by
Stephen Broadberry  and
Kyoji Fukao
Stephen Broadberry
Affiliation:
University of Oxford
Kyoji Fukao
Affiliation:
Hitotsubashi University, Tokyo
Get access

Summary

In this chapter we survey the history of international finance spanning a century and a half. We start by characterizing capital flows in the long run, organizing our discussion around six facts relating to the volume and volatility of capital flows, measured in both net and gross terms. We then connect up the discussion with exchange rates and monetary policies. The organizing framework for this section is the macroeconomic trilemma. We describe where countries situated themselves relative to the trilemma over time and consider the political economy of their choices. Finally, we study the connections between international finance and economic and financial stability. We present consistent measures of growth and debt crises over the century and a half covered in this chapter and discuss how their incidence is related to those institutional and political circumstances, and, more generally, to the nature of the international monetary and financial regime.

Keywords

Capital flowsmonetary systemsmacroeconomic trilemmagrowth crisesfinancial crises
Type
Chapter
Information
The Cambridge Economic History of the Modern World , pp. 501 - 525
Publisher: Cambridge University Press
Print publication year: 2021

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Aizenman, J., Chinn, M., and Ito, H. (2013). ‘The “Impossible Trinity” Hypothesis in an Era of Global Imbalances: Measurement and Testing’, Review of International Economics, 21, 447–458.Google Scholar
Alfaro, L., Chanda, A., Kalemli-Ozcan, S., and Sayek, S. (2004). ‘FDI and Economic Growth: The Role of Local Financial Markets’, Journal of International Economics, 64(1), 89–112.CrossRefGoogle Scholar
Bekaert, G. and Mehl, A. (2017). ‘On the Global Financial Market Integration “Swoosh” and the Trilemma’, NBER working paper 23124, National Bureau of Economic Research.CrossRefGoogle Scholar
Berdiev, A., Kim, Y., and Chang, C.-P. (2012). ‘The Political Economy of Exchange Rate Regimes in Developed and Developing Countries’, European Journal of Political Economy, 28, 38–53.CrossRefGoogle Scholar
Bernanke, B. (2005). ‘The Global Saving Glut and the US Current Account Deficit’, remarks at the Sandridge Lecture, Virginia Association of Economists, Richmond, VA.Google Scholar
Blanchard, O., Adler, G., and de Carvalho, I. (2015). ‘Can Foreign Exchange Intervention Stem Exchange Rate Pressures from Global Capital Flow Shocks’, NBER working paper 21427, National Bureau of Economic Research.Google Scholar
Bordo, M. and Flandreau, M. (2003). ‘Core, Periphery, Exchange Rate Regimes, and Globalization’, in Bordo, M., Taylor, A., and Williamson, J. (eds.), Globalization in Historical Perspective, University of Chicago Press, 417–472.CrossRefGoogle Scholar
Bordo, M., Eichengreen, B. and Irwin, D. A. (1999). ‘Is Globalization Today Really Different than Globalization a Hundred Years Ago?’, in Collins, S. and Lawrence, R. (eds.), Brookings Trade Policy Forum, Washington, DC: Brookings Institution.Google Scholar
Bordo, M., Eichengreen, B., Klingebiel, D., Martinez-Peria, M. S., and Rose, A. (2001). ‘Is the Crisis Problem Growing More Severe?’, Economic Policy, 16(32), 51–82.Google Scholar
Bordo, M., Cavallo, A., and Meissner, C. (2010). ‘Sudden Stops: Determinants and Output Effects in the First Era of Globalization, 1880–1913’, Journal of Development Economics, 91(2), 227–241.CrossRefGoogle Scholar
Cain, P. and Hopkins, A. (1980). ‘The Political Economy of British Expansion Overseas, 1750–1914’, Economic History Review, 33(4), 463–490.Google Scholar
Cairncross, A. (1953). Home and Foreign Investment, 1870–1913: Studies in Capital Accumulation, Cambridge University Press.Google Scholar
Calvo, G. and Reinhart, C. (2002). ‘Fear of Floating’, Quarterly Journal of Economics, 107(2), 379–408.CrossRefGoogle Scholar
Cavallo, E., Pedemonte, M., Powell, A., and Tavella, P. (2015). ‘A New Taxonomy of Sudden Stops: Which Sudden Stops Should Countries Be Most Concerned About?’, Journal of International Money and Banking, 51, 47–70.Google Scholar
Clemens, M. and Williamson, J. (2004). ‘Wealth Bias in the First Global Capital Market Boom, 1870–1913’, Economic Journal, 114, 303–337.Google Scholar
De Cecco, M. (1974). Money and Empire: The International Gold Standard, 1890–1914, Oxford: Blackwell.Google Scholar
Della Paolera, G. and Taylor, A. (eds.) (2003). A New Economic History of Argentina, New York: Cambridge University Press.Google Scholar
Desai, M., Fritz Foley, C., and Hines, J. R. (2004). ‘A Multinational Perspective on Capital Structure Choice and Internal Capital Markets’, Journal of Finance, 59(6), 2451–2487.Google Scholar
Edelstein, M. (1982). Overseas Investment in the Age of High Imperialism: The United Kingdom, 1850–1914, New York: Columbia University Press.Google Scholar
Eichengreen, B. (1996). Globalizing Capital: A History of the International Monetary System, Princeton University Press.Google Scholar
Eichengreen, B. (2003). Capital Flows and Crises, Cambridge, MA: MIT Press.Google Scholar
Eichengreen, B. (2011). Exorbitant Privilege: The Rise and Fall of the Dollar, Oxford University Press.Google Scholar
Esteves, R. (2007). ‘Between Imperialism and Capitalism. European Capital Exports before 1914’, mimeo.Google Scholar
Eugeni, S. (2016). ‘Global Imbalances in the XIX, XX and the XXI Centuries’, Economics Letters, 14, 69–72.Google Scholar
Feis, H. (1930). Europe, the World’s Banker, 1870–1914, New Haven: Yale University Press.Google Scholar
Feldstein, M. and Horioka, C. (1980). ‘Domestic Saving and International Capital Flows’, Economic Journal, 90, 314–329.Google Scholar
Fishlow, A. (1985). ‘Lessons from the Past: Capital Markets During the Nineteenth Century and the Interwar Period’, International Organization, 39, 38–93.Google Scholar
Forbes, K. and Warnock, F. (2012). ‘Capital Flow Waves, Surges, Stops, Flight and Retrenchment’, Journal of International Economics, 88, 235–251.Google Scholar
Ford, A. G. (1962). The Gold Standard, 1880–1914: Britain and Argentina, Oxford: Clarendon Press.Google Scholar
Ghosh, A., Ostry, J., and Qureshi, M. (2014). ‘Exchange Rate Management and Crisis Susceptibility: A Reassessment’, IMF working paper 14/11, International Monetary Fund.Google Scholar
International Monetary Fund. (2012). ‘The Liberalization and Management of Capital Flows: An Institutional View’, International Monetary Fund.Google Scholar
International Monetary Fund(2014). ‘How Do Changes in the Investor Base and Financial Deepening Affect Emerging Market Economies?’, in Global Financial Stability Report, April 2014, ch. 2, International Monetary Fund.Google Scholar
Irwin, D. (2011). Trade Policy Disaster: Lessons from the 1930s, Cambridge, MA: MIT Press.CrossRefGoogle Scholar
Jalil, A. (2015). ‘A New History of Banking Panics in the United States, 1825–1929: Construction and Implications’, American Economic Journal: Macroeconomics, 7, 295–330.Google Scholar
Jones, M. and Obstfeld, M. (2001). ‘Saving, Investment, and Gold: A Reassessment of Historical Current Account Data’, in Calvo, G., Dornbusch, R., and Obstfeld, M. (eds.), Money, Capital Mobility, and Trade: Essays in Honor of Robert Mundell, Cambridge, MA: MIT Press, 303–363.Google Scholar
Keynes, J. M. (1913). Indian Currency and Finance, London: Macmillan.Google Scholar
Keynes, J. M. (1919). The Economic Consequences of the Peace, London: Macmillan.Google Scholar
Kindleberger, C. (1973). The World in Depression, 1929–1939, Berkeley: University of California Press.Google Scholar
Kindleberger, C. (1978). Manias, Panics and Crashes: A History of Financial Crises, New York: Basic Books.Google Scholar
Leblang, D. (1999). ‘Political Institutions and Exchange Rate Commitments in the Developing World’, International Studies Quarterly, 43, 599–620.CrossRefGoogle Scholar
Lucas, R. (1990). ‘Why Doesn’t Capital Flow from Rich to Poor Countries?’, American Economic Review, 80(2), 92–96.Google Scholar
Marshall, M., Gurr, T., and Jaggers, K. (2016). Polity IV Project: Political Regime Characteristics and Transitions, 1800–2015, Vienna, VA: Center for Systemic Peace.Google Scholar
Mauro, P., Sussman, N., and Yafeh, Y. (2002). ‘Emerging Market Spreads: Then Versus Now’, Quarterly Journal of Economics, 117(2), 695–733.Google Scholar
Nurkse, R. (1944). International Currency Experience, Geneva: League of Nations.Google Scholar
Obstfeld, M. and Taylor, A. (2004). Global Capital Markets: Integration, Crisis, and Growth, Cambridge University Press.Google Scholar
Obstfeld, M., Shambaugh, J., and Taylor, A. (2004). ‘Monetary Sovereignty, Exchange Rates, and Capital Controls: The Trilemma in the Interwar Period’, IMF Staff Papers, 51, 75–108.Google Scholar
Obstfeld, M., Shambaugh, J., and Taylor, A. (2005). ‘The Trilemma in History: Tradeoffs among Exchange Rates, Monetary Policies, and Capital Mobility’, Review of Economics and Statistics, 87(3), 423–438.CrossRefGoogle Scholar
Organisation for Economic Co-operation and Development. (2008). OECD Benchmark Definition of Foreign Direct Investment, 4th ed., Paris: OECD.Google Scholar
Quinn, D. (2003). ‘Capital Account Liberalization and Financial Globalization, 1890–1999: A Synoptic View’, International Journal of Finance and Economics, 8, 189–204.CrossRefGoogle Scholar
Quinn, D. and Voth, H.-J. (2008). ‘A Century of Global Equity Market Correlations’, American Economic Review Papers and Proceedings, 98, 535–540.Google Scholar
Reinhart, C. and Rogoff, K. (2009). This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.Google Scholar
Rey, H. (2015). ‘Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence’, NBER working paper 21162, National Bureau of Economic Research.Google Scholar
Schularick, M. and Steger, T. (2010). ‘Financial Integration, Investment, and Economic Growth: Evidence from Two Eras of Financial Globalization’, Review of Economics and Statistics, 92(4), 756–768.Google Scholar
Sprague, O. (1910). History of Crises under the National Banking System, Washington, DC: National Monetary Commission.Google Scholar
Stone, I. (1999).The Global Export of Capital from Great Britain, 1865–1914: A Statistical Survey, London: Macmillan.Google Scholar
Temin, P. (1987). ‘Capital Exports, 1870–1914: An Alternative Model’, Economic History Review, 40(3), 453–458.Google Scholar
White, H. (1933). The French International Accounts, Cambridge, MA: Harvard University Press.Google Scholar
Wilkins, M. (ed.) (1991). The Growth of Multinationals, Aldershot: Elgar.Google Scholar
Woodruff, W. (1966). Impact of Western Man: A Study of Europe’s Role in the World Economy 1750–1960, London: Macmillan.Google Scholar

Save book to Kindle

To save this book to your Kindle, first ensure [email protected] is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×