Financial Openness, Democracy, and Redistributive Policy:
June 2000 - What explains the spread of both democracy and financial openness at this time in history, given the constraining impact of financial market integration on national policy autonomy? International policy coordination is part of the answer, but not all. Also important is the presence of co...
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1. Verfasser: | |
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Format: | Elektronisch E-Book |
Sprache: | English |
Veröffentlicht: |
Washington, D.C
The World Bank
1999
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Online-Zugang: | BSB01 EUV01 HTW01 FHI01 IOS01 Volltext |
Zusammenfassung: | June 2000 - What explains the spread of both democracy and financial openness at this time in history, given the constraining impact of financial market integration on national policy autonomy? International policy coordination is part of the answer, but not all. Also important is the presence of cost-effective redistributive schemes that provide insurance against the risk of financial instability. The debate about the relationship between democratic forms of government and the free movement of capital across borders dates to the 18th century. It has regained prominence as capital on a massive scale has become increasingly mobile and as free economies experience continuous pressure from rapidly changing technology, market integration, changing consumer preferences, and intensified competition. These changes imply greater uncertainty about citizens' future income positions, which could prompt them to seek insurance through the marketplace or through constitutionally arranged income redistribution. As more countries move toward democracy, the availability of such insurance mechanisms to citizens is key if political pressure for capital controls is to be averted and if public support for an open, liberal international financial order is to be maintained. Dailami briefly reviews how today's international financial system evolved from one of mostly closed capital accounts immediately after World War II to today's enormous, largely free-flowing market. Drawing on insights from the literature on public choice and constitutional political economy, Dailami develops an analytical framework for a welfare cost-benefit analysis of financial openness to international capital flows. The main welfare benefits of financial openness derive from greater economic efficiency and increased opportunities for risk diversification. The welfare costs relate to the cost of insurance used as a mechanism for coping with the risks of financial volatility. These insurance costs are the economic losses associated with redistribution, including moral hazard, rent-seeking, and rent-avoidance. A cross-sectional analysis of a large sample of developed and developing countries shows the positive correlation between democracy (as defined by political and civil liberty) and financial openness. More rigorous econometric investigation using logit analysis and controlling for level of income also shows that redistributive social policies are key in determining the likelihood that countries can successfully combine an openness to international capital mobility with democratic forms of government. |
Beschreibung: | 1 Online-Ressource (38 Seiten)) |
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520 | 3 | |a June 2000 - What explains the spread of both democracy and financial openness at this time in history, given the constraining impact of financial market integration on national policy autonomy? International policy coordination is part of the answer, but not all. Also important is the presence of cost-effective redistributive schemes that provide insurance against the risk of financial instability. The debate about the relationship between democratic forms of government and the free movement of capital across borders dates to the 18th century. It has regained prominence as capital on a massive scale has become increasingly mobile and as free economies experience continuous pressure from rapidly changing technology, market integration, changing consumer preferences, and intensified competition. | |
520 | 3 | |a These changes imply greater uncertainty about citizens' future income positions, which could prompt them to seek insurance through the marketplace or through constitutionally arranged income redistribution. As more countries move toward democracy, the availability of such insurance mechanisms to citizens is key if political pressure for capital controls is to be averted and if public support for an open, liberal international financial order is to be maintained. Dailami briefly reviews how today's international financial system evolved from one of mostly closed capital accounts immediately after World War II to today's enormous, largely free-flowing market. Drawing on insights from the literature on public choice and constitutional political economy, Dailami develops an analytical framework for a welfare cost-benefit analysis of financial openness to international capital flows. | |
520 | 3 | |a The main welfare benefits of financial openness derive from greater economic efficiency and increased opportunities for risk diversification. The welfare costs relate to the cost of insurance used as a mechanism for coping with the risks of financial volatility. These insurance costs are the economic losses associated with redistribution, including moral hazard, rent-seeking, and rent-avoidance. A cross-sectional analysis of a large sample of developed and developing countries shows the positive correlation between democracy (as defined by political and civil liberty) and financial openness. More rigorous econometric investigation using logit analysis and controlling for level of income also shows that redistributive social policies are key in determining the likelihood that countries can successfully combine an openness to international capital mobility with democratic forms of government. | |
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author | Dailami, Mansoor |
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spelling | Dailami, Mansoor Verfasser aut Financial Openness, Democracy, and Redistributive Policy Dailami, Mansoor Washington, D.C The World Bank 1999 1 Online-Ressource (38 Seiten)) txt rdacontent c rdamedia cr rdacarrier June 2000 - What explains the spread of both democracy and financial openness at this time in history, given the constraining impact of financial market integration on national policy autonomy? International policy coordination is part of the answer, but not all. Also important is the presence of cost-effective redistributive schemes that provide insurance against the risk of financial instability. The debate about the relationship between democratic forms of government and the free movement of capital across borders dates to the 18th century. It has regained prominence as capital on a massive scale has become increasingly mobile and as free economies experience continuous pressure from rapidly changing technology, market integration, changing consumer preferences, and intensified competition. These changes imply greater uncertainty about citizens' future income positions, which could prompt them to seek insurance through the marketplace or through constitutionally arranged income redistribution. As more countries move toward democracy, the availability of such insurance mechanisms to citizens is key if political pressure for capital controls is to be averted and if public support for an open, liberal international financial order is to be maintained. Dailami briefly reviews how today's international financial system evolved from one of mostly closed capital accounts immediately after World War II to today's enormous, largely free-flowing market. Drawing on insights from the literature on public choice and constitutional political economy, Dailami develops an analytical framework for a welfare cost-benefit analysis of financial openness to international capital flows. The main welfare benefits of financial openness derive from greater economic efficiency and increased opportunities for risk diversification. The welfare costs relate to the cost of insurance used as a mechanism for coping with the risks of financial volatility. These insurance costs are the economic losses associated with redistribution, including moral hazard, rent-seeking, and rent-avoidance. A cross-sectional analysis of a large sample of developed and developing countries shows the positive correlation between democracy (as defined by political and civil liberty) and financial openness. More rigorous econometric investigation using logit analysis and controlling for level of income also shows that redistributive social policies are key in determining the likelihood that countries can successfully combine an openness to international capital mobility with democratic forms of government. Online-Ausg Banks and Banking Reform Bonds Capital Flows Capital Movements Currencies and Exchange Rates Debt Markets Developing Countries Economic Efficiency Economic Theory and Research Emerging Markets Finance and Financial Sector Development Financial Literacy Financial Openness Free Capital Future Governance Governance Indicators Government Policies Information Technologies Insurance International Capital International Capital Mobility International Financial Markets International Financial System International Lending Labor Policies Macroeconomic Management Macroeconomics and Economic Growth Market Market Integration Moral Hazard Political Economy Private Sector Development Social Protections and Labor Dailami, Mansoor Sonstige oth Dailami, Mansoor Financial Openness, Democracy, and Redistributive Policy http://elibrary.worldbank.org/content/workingpaper/10.1596/1813-9450-2372 Verlag URL des Erstveröffentlichers Volltext |
spellingShingle | Dailami, Mansoor Financial Openness, Democracy, and Redistributive Policy Banks and Banking Reform Bonds Capital Flows Capital Movements Currencies and Exchange Rates Debt Markets Developing Countries Economic Efficiency Economic Theory and Research Emerging Markets Finance and Financial Sector Development Financial Literacy Financial Openness Free Capital Future Governance Governance Indicators Government Policies Information Technologies Insurance International Capital International Capital Mobility International Financial Markets International Financial System International Lending Labor Policies Macroeconomic Management Macroeconomics and Economic Growth Market Market Integration Moral Hazard Political Economy Private Sector Development Social Protections and Labor |
title | Financial Openness, Democracy, and Redistributive Policy |
title_auth | Financial Openness, Democracy, and Redistributive Policy |
title_exact_search | Financial Openness, Democracy, and Redistributive Policy |
title_exact_search_txtP | Financial Openness, Democracy, and Redistributive Policy |
title_full | Financial Openness, Democracy, and Redistributive Policy Dailami, Mansoor |
title_fullStr | Financial Openness, Democracy, and Redistributive Policy Dailami, Mansoor |
title_full_unstemmed | Financial Openness, Democracy, and Redistributive Policy Dailami, Mansoor |
title_short | Financial Openness, Democracy, and Redistributive Policy |
title_sort | financial openness democracy and redistributive policy |
topic | Banks and Banking Reform Bonds Capital Flows Capital Movements Currencies and Exchange Rates Debt Markets Developing Countries Economic Efficiency Economic Theory and Research Emerging Markets Finance and Financial Sector Development Financial Literacy Financial Openness Free Capital Future Governance Governance Indicators Government Policies Information Technologies Insurance International Capital International Capital Mobility International Financial Markets International Financial System International Lending Labor Policies Macroeconomic Management Macroeconomics and Economic Growth Market Market Integration Moral Hazard Political Economy Private Sector Development Social Protections and Labor |
topic_facet | Banks and Banking Reform Bonds Capital Flows Capital Movements Currencies and Exchange Rates Debt Markets Developing Countries Economic Efficiency Economic Theory and Research Emerging Markets Finance and Financial Sector Development Financial Literacy Financial Openness Free Capital Future Governance Governance Indicators Government Policies Information Technologies Insurance International Capital International Capital Mobility International Financial Markets International Financial System International Lending Labor Policies Macroeconomic Management Macroeconomics and Economic Growth Market Market Integration Moral Hazard Political Economy Private Sector Development Social Protections and Labor |
url | http://elibrary.worldbank.org/content/workingpaper/10.1596/1813-9450-2372 |
work_keys_str_mv | AT dailamimansoor financialopennessdemocracyandredistributivepolicy |