International Capital Mobility
International Capital mobility- the free flow of investment financing from one country to another is a hot topic in the world of economics. A common question that rises when discussing this matter is, does capital mobility benefit developing countries? As with most other subjects the answers tend to vary.
In this paper I will shine light on the point of view of two respectable economists concerning the positive and negative affects associated with capital mobility. Also, how developing countries may or may not benefit in the long run. James Bradford DeLong a Professor of Economics at the University of California at Berkeley (DeLong, Biography, 2004) and Joseph Stiglitz a leading economic educator who is recognized around the world (Stiglitz, Biography, 2004).
The standard crisis developing countries face is, a high demand for goods and services, with high money growth, high government spending, high wages, and high inflation. All while exports are low and imports are high. The standard solution is slow money growth and low government spending. Unfortunately these cures take time and during the transition the country may borrow from the IMF to finance the trade imbalance.
DeLong’s stance on the subject is that, “large international capital mobility is a good thing. It raises the earnings of savers and lowers the cost of capital to investing firms, it gives the rich an extra source of insurance and the poor an extra source of knowledge of modern industrial high productivity technologies, and shutting off capital flows creates enormous opportunities and incentives for corruption which deprives societies of an early warning signal that their governments are following dangerous and destructiv...
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... point out the ugly truth that it seems to only look good on paper, but when it comes to how the process plays out it looks grim. As DeLong states in his article, The Economists’ Voice, the results of international capital mobility seems to be, “ a flawed situation that may still be the best we can do”.
Bibliography
Bradford DeLong, “The Economists’ Voice”
http://www.bepress.com/ev/vol1/iss/art1
Bradford DeLong, “Joe Stiglitz is Losing His Argument”
http://econ161.berkely.edu/movable_type/archives/001397.html
Bradford DeLong, “Biography of J. Bradford DeLong”
www.j-bradford-delong.net/career/onepagebiography.html
Joseph Stiglitz, “Biography of Joseph E.Stiglitz”
www.gsb.Columbia.edu/faculty/jstiglitz/bio.cfm
Joseph Stiglitz, “ What I learned at the World Economic Crisis”
http://econ.cudenver.edu/Beckman/econ4410/stiglitz world%20crisis.doc
Xeroderma Pigmentosum, or XP, is caused by a mutation in one or more of any seven genes. The first type of mutation that may occur is XPA, caused by a mutation of 9q22.3. This means that mutation occurred in the ninth chromosome on the long arm, q, 22.3 map units from the centromere, or middle, of the chromosome....
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Woodward, D. (2001). The next crisis?: Direct and equity investment in developing countries. London: Zed Books.
International Monetary Fund (IMF), 2008, “International Monetary Fund: Issues Brief”, IMF Publications, Available at : www.imf.org
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