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Contagion, Liberalization, and the Optimal Structure of Globalization

Joseph E. Stiglitz

Title:
Contagion, Liberalization, and the Optimal Structure of Globalization
Author(s):
Stiglitz, Joseph E.
Date:
Type:
Articles
Department:
Business
Volume:
1
Permanent URL:
Book/Journal Title:
Journal of Globalization and Development
Abstract:
Advocates of capital market liberalization argue that it leads to greater stability: countries faced with a negative shock borrow from the rest of the world, allowing cross-country smoothing. There is considerable evidence against this conclusion. This paper explores one reason: integration can exacerbate contagion; a failure in one country can more easily spread to others. It derives conditions under which such adverse effects overwhelm the putative positive effects. It explains how capital controls can be welfare enhancing, reducing the risk of adverse effects from contagion. This paper presents an analytic framework within which we can begin to address broader questions of optimal economic architectures.
Subject(s):
Economics
Publisher DOI:
10.2202/1948-1837.1149
Item views:
1377
Metadata:
text | xml

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