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Discussion Paper Details

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Title: The Global Capital Market Reconsidered

Author(s): Maurice Obstfeld

Publication Date: July 2021

Keyword(s): embedded liberalism, Financial Stability, Global capital market, Globalization and multilateralism

Programme Area(s): Economic History, Financial Economics and International Macroeconomics and Finance

Abstract: While the globalization of production has been a prominent target of anti-globalization backlash, globalized finance has seemed to be much less in the public bull's-eye. The blueprint for the postwar international economy agreed at Bretton Woods in 1944 envisioned nothing like today's extensive and fluid global capital market. The demise of the 1946-1973 fixed exchange rate system, however, also brought a progressive dismantling of barriers to international financial flows motivated by special-interest politics, national economic competition, and ideology ?? alongside the benign desire for a more efficient international allocation of capital. Unfortunately, free cross-border financial capital mobility can compromise governments' capacities to attain domestic economic and social goals in several ways. This essay links the dynamics of financial liberalization to the Teflon-like resilience of finance to backlash so far, and suggests that stronger backlash could emerge if national governments fail to enhance multilateral cooperation to manage the financial commons.

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Bibliographic Reference

Obstfeld, M. 2021. 'The Global Capital Market Reconsidered'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=16375