Globalization, Capital Flows, and International Regulation

In the postwar period prior to 1990 policy proposals aimed at reducing the instabilities associated with
increased capital flows focused on increasing market efficiencies so that nominal variables would reflect real
conditions in the economy. However, those in charge of financial resource flows applied theories largely
unconcerned with fundamentals, resulting in such financial market instabilities as volatility in the foreign
exchange market. Andrew Cornford, of the Global Interdependence Division of UNCTAD (United Nations Conference on Trade and Development), and Jan Kregel, of the University of Bologna, examine the policies of
the postwar period and the reasons for their failure to produce economic stability. They then explore the means
by which instability might be reduced.