Title:

Contagion, Liberalization, and the Optimal Structure of Globalization

Author(s):

Stiglitz, Joseph E.

Date:

2010

Type:

Articles

Department:

Business

Volume:

1

Permanent URL:

http://hdl.handle.net/10022/AC:P:13532

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

DOI:

10.2202/1948-1837.1149

Item views:

832

Metadata:

description

View | Download