Yin-Wong Cheung, Sven Steinkamp, Frank Westermann, 27 January 2016

Since the beginning of the Global Crisis, illicit capital flows out of China have been in decline. This column argues that a key factor behind this is the relative money supply between China and the US. China’s rapidly increasing money supply, combined with the Fed’s expansionary monetary policy, prompted investors to reallocate their portfolios between the two countries. Another contributing factor is China’s gradual process of capital account liberalisation. The Fed’s interest rate hike in December may see a resurgence in China’s capital flight.

Davide Furceri, Prakash Loungani, 13 February 2014

Income inequality has been growing in many economies over the past two decades, and it is currently historically high. This column adds two new contributors to the popular explanations of increased inequality. Fiscal consolidations, especially those following the recent crisis, can increase inequality, mostly by affecting the long-term unemployment. A second source that leads to a persistent increase in inequality is capital account liberalisation. Therefore, the effects of these policies on inequality should be taken into account when deciding upon policy designs.

Dennis Quinn, Hans-Joachim Voth, 05 November 2008

Investing in foreign markets may seem a good strategy for reducing risk. But this column shows that financial globalisation has resulted in increased correlation amongst international asset prices, thereby eliminating the diversification opportunities it was supposed to let investors harness.

Eswar Prasad, Raghuram Rajan, 11 August 2008

A decade after the Asian financial crisis, this column summarises the lessons learned about capital account liberalisation. Many developing countries are likely to move towards greater financial openness, which is desirable – if done right.

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