Controlling international capital flows

Controlling International Capital Flows

The East Asian financial crisis in the late 1990s has challenged the widely-held belief that international financial markets should be deregulated. The common arguments both for and against free international capital flows are analysed and contrasted. Given the existence of various distortions and market failures in the global economy, there is a case for some degree of control. The extension a...

International Capital Flows

Essays on International Capital Flows

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A Portfolio Theory of International Capital Flows

This paper constructs a model in which the currency composition of national portfolios is an essential element in facilitating capital ‡ows between countries. In a two country environment, each country chooses optimal nominal bond portfolios in face of real and nominal risk. Current account de…cits are …nanced by increases in domestic currency debt, but balanced by increases in foreign currency...

Securitization, Leverage, Tranching, and International Capital Flows

We show that (i) different collateral requirements across countries in securitized markets lead to net international capital flows, and (ii) the ability to tranche asset-backed securities in one country leads to offsetting portfolio flows, creating gross financial flows. We use a general equilibrium model with two countries, collateralized borrowing, and securitized markets. Financial systems d...