Capital Mobility And The Financial Crisis

1918 Words Mar 17th, 2015 8 Pages
Capital mobility in the Eurozone
ECO209 paper assignment
Lei Lin #1000672195

Introduction:
As the economy becomes more and more integrated, the trade barriers between individual countries are gradually removed. People now have more options in terms of goods, services, and of course investments, meaning capital flows are more mobile nowadays. However, deregulation of the capital raises controversy and concerns about whether if increasing capital mobility is going to bring prosperity, not only to the world economy in general, but to each country individually. According to Helleiner (1994), high capital mobility is claimed to be one of the causes to the 09 financial crisis as huge capital inflow entered into the US border and changed the housing structure and then gave rise to the easy mortgage credit and housing bubbles. However, this paper intends to find the link between the capital mobility and the financial crisis in order to see if this tragic outcome is inevitable when we have a relatively high capital mobility. The paper takes the stance that increase capital mobility is going to ultimately benefit the world economy as well as bring opportunities to countries that are ready to liberate their capital flow. The article is taking the case study approach and focuses on Europe Union before, during and after the financial crisis, as EU seems to be promising to have some convincing empirical evidence. The purpose of the paper is to show advantages of having a high…
Open Document