Handbook of Safeguarding Global Financial Stability

Chapter 19

Monetary Policy and Capital Mobility

M.M. Spiegel

Federal Reserve Bank of San Francisco, San Francisco, CA, USA

Outline

Introduction

Growth in International Capital Mobility and Monetary Policy

Measures of Capital Mobility

Global Imbalances

Convergence in Yields

Monetary Policy Responses

Arguments for Improved Monetary Policy Under Increased Capital Mobility

Increased International Asset Substitutability

Increased Wage and Price Flexibility

Reduced Public Pressure for Output Stabilization

Theoretical Arguments for Reduced Monetary Policy Quality

Reduced Policy Effectiveness

Increased Exposure to Global Shocks

Empirical Evidence

Conclusion

Glossary

References

Introduction

This chapter examines the relationship between capital mobility ...