By Matthew Watson (auth.)
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This quantity is part of a study undertaking initiated and financed through the realm financial institution entitled "Macroeconomic regulations, trouble, and progress within the lengthy Run," which concerned reports of the macroeconomic histories of eighteen nations as they tried to keep up fiscal balance within the face of overseas fee, rate of interest, and insist shocks or household crises within the varieties of funding books and similar budgetary difficulties.
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Additional resources for The Political Economy of International Capital Mobility
My preference is to treat capital mobility more generically as any instance in which a related pair of actions can be observed: an investment is initially liquidated in one form and then the capital released in this way is subsequently redeployed to ﬁnance a different investment. Feldstein and Horioka’s example clearly meets this standard, in that a cash-based investment position is liquidated for the speciﬁc purpose of taking an alternative investment position in the productive economy. Yet, this does not exhaust all the ways in which capital can be considered mobile.
Feldstein and Horioka did not expect for the evidence to reveal that the correlation between domestic savings and domestic investment no longer held at any level, given how demanding the standard of perfect capital mobility is. But they did expect to see a weakening correlation between domestic savings and domestic investment, as this would have been consistent with increasingly integrated national economies. In fact, though, they found that neither the strength nor the statistical signiﬁcance of that correlation had been diminished by the relaxation of capital controls in the mid-1970s (1980: 321).
In turn, this prevented creditors from taking the full hit of the devaluation and stopped them from feeling the need to lobby quite so aggressively for their interests to be defended by the increasing constitutionalisation of monetary orthodoxy. Now, by contrast, the full effects of price volatility on ﬁnancial markets is usually made manifest in no more than a matter of hours, sometimes over a matter of days, and hardly ever over a matter of weeks as in the Bretton Woods era. , Budd 1999). The Bretton Woods system used formal controls on the liquidation of existing positions to act as an institutionalised set of ﬁrebreakers, which were designed to slow the speed at which ﬁnancial risks were exposed.