Economics

Globale Kapitalregeln

Dec 13, 2012 Dani Rodrik

CAMBRIDGE, MASS. – Es ist offiziell. Der Internationale Währungsfonds hat Kapitalkontrollen sein Plazet gegeben und damit den Einsatz von Steuern und sonstigen Beschränkungen in Bezug auf grenzüberschreitende Finanzströme legitimiert.

Es ist noch nicht lange her, dass der IWF hart darauf drängte, dass sich alle Länder – reiche wie arme – für ausländische Finanzmittel öffnen sollten. Jetzt hat er die Realität anerkannt, dass die Finanzglobalisierung ein Störfaktor sein kann, der Finanzkrisen und wirtschaftlich nachteilige Währungsbewegungen hervorruft.

Die unendliche Geschichte unserer Hassliebe zu Kapitalkontrollen ist damit um eine weitere unerwartete Wendung reicher.

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Procyon Mukherjee Dec 15, 2012

In the seminal book, ‘This time is different’, Roggoff and Reinhart have coalesced the reasons that attract capital flows to move towards an investment destination; it is not capital to labor ratios, not even high marginal product of capital. But the authors were not very explicit about cross border flows.

For cross border capital flows, the reasons are embedded in a rather circular logic that surplus finds a temporary haven to temper the effects of surplus; given such a narrow reason, it is in the speculative judgment of principals and agents that cross border flows have exploited, rather than facilitated the development of investment destinations. When the quantum of surplus is rising together with the volatility of the surplus, it is very right to temper such flows with a transparent mechanism that allows the would-be victims to be aware, at least, of the possible risks.

Procyon Mukherjee
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Jonathan Lam Dec 14, 2012

Gamesmith94134: Argentina’s debt conundrum
Inasmuch the lock law and the pari passu (“equal footing”) clause included in the bonds, I see technical default and sovereignty debt default are inevitable; since there is no firewall in safeguard the financial architecture and sovereignty when there is a credit-debtor conflict. Even though Argentina or BNY Mellon repeals in the Supreme Court, there would be ruling granted differently in regard of the holdout of the “vulture Funds”, or guilty on the technical transfer default; but the situation would be the same as the ECB to accommodate the PIIGS under the auspice of the Euros and each sovereignty could have lost its right to trade under the free trade agreement or simply dollars. Therefore, US Supreme court is not the proper resolution to the international financial architecture, and it is not.
Based on the precedent cases of international creditor-debtor conflict, it is due to have a crucial change in the change of attitude of the Central Bank system and the firewall that sovereignties can contain. Apparently, those debtor nations are entrapped in the dominant currency and system they relied on; like always, some may expected the new debts added on to the old ones till it is unsustainable or the next card unfolded. At present, I do not see the system itself can change its outcome, like pari passu, in the near future till there is a real architectural development in the international financial system.
Basically, we do have existing infrastructures to support the international central bank that consisted of World Bank that can be authorized to intervene as the Central Bank of the world, IMF to facilitate the inflows and outflows of “vulture funds” for sovereignty that allows, and WTO can supervise and control the sum of transactions that are utilized in trade or monopoly. Perhaps, I would recommend the “one percent” to the transfer that would service the contingency fund to the needed, and provide the cushioning to local economy when it is overheated or stagnated. In addition, I think sovereignty debts must be treated separately with the commercial since the administration of the sovereignty debt must be guaranteed by the zone with its tribunals of sovereignties; so, monetarists may not abuse its currencies to loot or invade others and assistance of other nations with its surpluses would not evaporated under the condition of the underdeveloped
In order to having a common architecture financial system established, it may rely on the treaty agreement and control and rulings of the United Nations Security Council in mediating the disputes. It is a long ride, but unlimited litigations are more unbearable if one is contentious to abuse.
May the Buddha bless you?
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Venu Madhav Dec 14, 2012

Dear Dr. Rodrik, I like the fact that IMF has preferred a more active approach now, and yes I subscribe to your opinion on "the bouts of euphoria and bubbles, followed by the sudden stops and sharp reversals that are endemic to unsupervised and unregulated financial markets".

Being from a non-Economics background I do feel Cross border financial flows are welcome as long as there are two objectives that get addressed and not one, which is the country that gets the investment gets a time period to safe-lock the investment and show results within say 3 years else it will be a gradual phase-out within next 6-8 quarters, and of course the second objective is to get the minimum assured returns for the investors so there is capping on the downside so any phase-out is based on tangible milestones, else it will be a revolving door or like a stay-at-night hotel service. Something that I assume of course the investors are rational in their decision making and are not getting carried away a by herd mentality!
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Helmut Reisen Dec 13, 2012

As a former OECD economist who has argued early on (http://ideas.repec.org/p/oec/devaab/4-en.html) for the need of inflow controls, I should like to rectify a slight error that Dani keeps repeating. He overemphasizes the role of the OECD.
As for Mexico, I was a member of the team to prepare the country´s accession to the OECD and had opportunity to discuss the matter of financial opening cum hard peso peg to the dollar at length with Guillermo Ortiz. He agreed with the points I made but was very clear that Carlos Salinas, the President, and Pedro Aspe could not be convinced on the logic of either flexible FX rates or selective encaje-type controls.
As for Korea, a country that asked the OECD that I advise them in their talks on how to deal with the OECD Codes on Liberalisation, they finally entered the OECD to escape the much harder bilateral pressure - notably by the US treasury - to open up. They finally understood that the OECD is about soft, not hard, law that is difficult to enforce. As an OECD member, they happily continued with a semi-closed capital account for quite a while.
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Faruk Timuroglu Dec 13, 2012

The true sovereigns of the world are the advanced countries. They regulate finance in most convenient way to their interest and oblige the rest to follow.
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