Free DP Download 15 October 2021 - The Global Capital Market Reconsidered

Friday, October 15, 2021

Maurice Obstfeld CEPR Discussion Paper No. 16375 | July 2021


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 â?? 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 a backlash so far and suggests that stronger backlash could emerge if national governments fail to enhance multilateral cooperation to manage the financial commons.

You can also listen to a podcast where Maurice Obstfeld discusses the paper's findings with CEPR's Tim Phillips