The Puzzling Lure of Financial Globalization
Although most of the intellectual consensus behind neoliberalism has collapsed, the idea that emerging markets should throw their borders open to foreign financial flows is still taken for granted in policymaking circles. Until that changes, the developing world will suffer from unnecessary volatility, periodic crises, and lost dynamism.
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CAMBRIDGE – After holding off for decades, China has finally embraced financial globalization, announcing recently that it would eliminate capital controls to allow unfettered short-term foreign inflows (so-called hot money). By contrast, after decades of boom-bust cycles, Argentina is facing another a macroeconomic crisis, and has finally imposed capital controls to prevent a catastrophic decline in its currency.