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Economics focus Third thoughts on foreign capital Nov 16th 2006 From The Economist print edition If it doesn't kill you, financial globalisation will make you stronger THE next great globalisation, according to Frederic Mishkin's new book* of that name, will be financial in character: the flow of foreign money into stocks, bonds and banking in emerging economies. A recently appointed governor of the Federal Reserve, Mr Mishkin makes a clear and compact case for cosmopolitan capital; and his footnotes (all 55 pages of them) weigh and tally a wealth of economic research. But the title of his book is a bit odd: wasn't cross-border finance the last, rather disappointing, globalisation? That, certainly, was the verdict of a 2003 review† of the evidence by a quartet of economists (Eswar Prasad, Ken Rogoff, Shang-Jin Wei and Ayhan Kose) who looked at almost as many studies as Mr Mishkin. They found no robust proof that financial globalisation helped countries to grow more quickly. The song was not original, but the singers were impossible to ignore: all four were prominent economists at the IMF; Mr Rogoff, indeed, was the fund's chief economic adviser. It was as if the Fed's economists had failed to find any virtue in low inflation. Now the same authors are offering another reappraisal of financial globalisation†† , which Mr Prasad presented earlier this month at the IMF's annual research conference. The next globalisation is probably going to happen, he said (money has a habit of seeping across borders, whether you like it or not), and it may be great. But not for the reasons you might think. It's not about the money
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This note was uploaded on 04/19/2010 for the course ECON 430 taught by Professor Arroyoabad during the Fall '10 term at Middlebury.

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