Handbook of Safeguarding Global Financial Stability

Chapter 9

Theoretical Perspectives, Overview

P. Bacchetta*,^† and P.R. Lane^†,‡

^*University of Lausanne, Lausanne, Switzerland

^†CEPR, London, UK

^‡Trinity College Dublin, Dublin, Ireland

Outline

Introduction

Net Capital Flows and the Current Account

Gross Capital Flows and the Structure of International Balance Sheets

Capital Flows and Crises

Exchange Rates as Asset Prices

Financial Globalization and the Policy Environment

Conclusions

References

Introduction

From a macroeconomic perspective, the recent process of financial globalization has raised several important issues. First, net capital flows increased substantially, in ways that have not been fully consistent with existing theories of the late twentieth century. In particular, the phenomenon ...