Subramanian and Williamson on capital flows

International capital flows have had a destabilising effect in several countries in recent years, including Ireland. Arvind Subramanian and John Williamson have an interesting piece on the new Brazilian tax on capital inflows, here.

6 replies on “Subramanian and Williamson on capital flows”

Wasn’t Joe Stiglitz’s book on the Asian crises of the 1990s mainly to do with capital inflows and outflows?

Haven’t the Asians already learned a lot of these lessons? How have they set up defenses to deal with it in the future?

It has become apparent that the global economic policy is to have government interference on the downside — in the name of balance — but not on the upside; hence that purported balance can never be achieved. This is a policy for bubbles. I don’t know whether it is better to follow the libertarian premise of no government intereference in either case, but if you ARE going to allow it in one direction, it”s best to allow it in both. Anything less is hypocritical or, as the authors mention, doctrinaire.

Brian, Kevin, there is no Irish analogy with Brazil (or the Asian crisis). The government there has chosen to deter unwanted and perhaps destabilising inflows. We can’t do things like that in the EU, and did’nt lack other instruments had Govt wished to prick the bubble, which they did’nt. Marise, the big current sin against symmetry is surely the socialisation of losses in the intl banking system, is this what you’re driving at?

@Colm: I am aware that we can’t impose capital controls within the EU! But, foreign borrowing by Irish banks was a part of what went wrong here, as Patrick pointed out in 2006. To that extent, we are Thailand without the baht, but with the euro and the single market, which has obvious benefits (but also obvious costs).

Having said that, I posted the link not because it had any particular connection with Ireland, but because the question of what (if anything) this crisis will do to international capital markets in the long run is IMO a fascinating one.

Steve Keen is also concerned, as the Aussie $ is ripe for a carry trade which could last for a while and be very volatile given our, Aussie, dependence on foreign capital.

We have a S American country showing that it recognizes Gringo money as being poisonous. It should always come with a warning! Norway insisted on non domestic investment. Does it have any way of discouraging “hot flushes”?

Iceland seems to have settled with the big boys behind their hot flush? How much did the boys get back at NPV, in cents on the dollar?

Encourasging locals to lose the flows locally may discourage them! If Nama goes through, they will only be encouraged to lend to Ireland again. Poison!

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