A tale of two ‘globalizations’: capital flows from rich to poor in two eras of global finance

Abstract

In this paper we take a comparative look at the patterns of capital flows from rich to poor countries in two eras of financial globalization. The paper extends recent research on the developmental effects of international financial integration, long-term trends in capital mobility and 'globalization in historical perspective'. Analysing the patterns of international financial integration in the three decades of the classical gold standard and after 1990 we show that investment in developing countries was a central element of 19th century financial globalization, but plays only a minor role today. The Lucas paradox of capital failing to flow from rich to poor has grown much stronger. In historical perspective, today's financial globalization is marked by massive diversification flows between high-income economies and a relative marginalization of less-developed economies.

Sub-Saharan Africa's Integration in the Global Financial Markets

“…In practice however, the bulk of observed flows, particularly in the modern period, consists of flows among developed economies. Compared to the early 20th century era of financial globalization, the current wave of capital flows is characterized by massive diversification of flows between high-income economies and a relative marginalization of less-developed economies (Obstfeld and Taylor, 2004, Schularick, 2006, and Schularick and Steger, 2008.…”

Real convergence, financial markets, and the current account – Emerging Europe versus emerging Asia

“…Likewise, Prasad et al (2007) conclude that emerging markets do not rely on capital infl ows from rich countries, as they generate more savings than they invest. Similarly, Schularick (2006) identifi es a wealth bias on the part of international investors. In recent years, other emerging market economies have seen 3 improving current account balances as well, mainly refl ecting the rise in oil and other raw material prices, which has supported trade and current account balances in many resource-rich countries.…”

New Strategies for Emerging Domestic Sovereign Bond Markets in the Global Financial Landscape

“…This index is currently lower for emerging markets than at the end of the previous globalisation era (while the advanced market countries experienced a much stronger financial integration over the same period; Graph 5). Source: OECD Development Centre, 2007; based on Schularick, 2006 and GDP figures from Maddison (1995Maddison ( , 2001). Source: OECD Development Centre, 2007; based on Schularick, 2006and GDP figures from Maddison (1995, 2001).…”

“…Source: OECD Development Centre, 2007; based on Schularick, 2006 and GDP figures from Maddison (1995Maddison ( , 2001). Source: OECD Development Centre, 2007; based on Schularick, 2006and GDP figures from Maddison (1995, 2001). …”