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lec_6_110B - Economics110B WorldEconomic HistoryII...

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    Economics 110B  World Economic  History II Spring 2009 University of California, Davis Lecture 6: The First Great Wave of  Globalization—Financial Integration
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    Today’s Program Conclusions from Migration lecture: micro motives for moving The “TRILEMMA” (1) CAPTIAL MARKET INTEGRATION (2) EXCHANGE RATE POLICY (3) MONETARY POLICY Integration in history Monetary Policy over the long run Exchange rate regimes in the past Crisis! This is what happens when you do not follow the trilemma. Stay Tuned (in): Your first mid-term: What to Expect Remember!  No make up exams.
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    Readings Cameron and Neal Ch.12, pp, 301-307
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    Pattern of European Late 19 th  century  emigration time Volume of emigration 1850 1915 Introductory Growth Saturation Regression
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    Conclusions from Migration Main factors driving whether to migrate: Relative wages, credit and information constraints,  demographic effects The largest waves of (voluntary) migration are in the late  19 th  century out of Europe. Many go the US but Canada,  Australia and Argentina are major recipients. They come  from NW Europe first and then S, E and SE Europe. Migration today has been stopped by cross-border  boundaries which started in the 1920s. Many aspects of  migration in the underdeveloped world today are similar  to those in the 19 th  century
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    Introduction Globalization is a fact now just as it was then  - By then I mean 1850-1913 Policy makers faced many similar dilemmas or trilemmas A country can have at most two of the following three International capital market integration, Domestic monetary policy  Fixed exchange rates This is called not the dilemma but the trilemma and it has been  resolved in different ways over time 1850-1913: Integration, fixed exchange rates 1920-1939 An attempt to have them all = crises 1950-1972: domestic policy, fixed exchange rates 1972-: domestic policy, floating
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    The Impossible Trinity or the Trilemma Stable exchange rates or a currency union Freely moving cross-border capital Monetary policy focused on domestic objectives
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