Chapter

Should We Fear Capital Flows?

René M. Stulz

in International Financial Markets

Published by University of Chicago Press

Published in print April 2003 | ISBN: 9780226032146
Published online February 2013 | e-ISBN: 9780226032153 | DOI: http://dx.doi.org/10.7208/chicago/9780226032153.003.0004
Should We Fear Capital Flows?

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This chapter analyzes the advantages and disadvantages of capital flows for the international financial market. It explains the benefits of capital mobility which include reduction of the cost of capital, improvement in corporate governance and differentiation of a country's capital from its investments. This chapter considers the issue of whether the costs of sudden withdrawals of capital by foreign investors can offset the benefits of capital mobility. It also argues that the appropriate policies to eliminate the fragility of emerging economies are policies that foster better financial structures, so that long-term contracting can be supported.

Keywords: capital flows; international financial markets; capital mobility; cost of capital; corporate governance; foreign investors

Chapter.  18047 words.  Illustrated.

Subjects: International Economics

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