The Evolution of the Global Financial Order
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This chapter provides a brief historical background for the development of financial globalization in the late twentieth and early twenty-first centuries described in the previous chapter. Although financial globalization has taken on many new forms since the 1980s, it is not a new phenomenon. International banking can be traced back to the Middle Ages, but financial globalization on a large scale began to take hold in the period of the international gold standard (1870–1914). This period was followed by a collapse of financial globalization due to the breakdown of the international economic system caused by two world wars and the Great Depression. This chapter traces out the rise, decline, and resurgence of financial globalization in the period since the gold standard and the origins of the present-day IFA in the early post-World War II era.
KeywordsExchange Rate Central Bank Capital Control International Monetary System Bretton Wood System
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- 11.Alan Taylor (2003) has shown that the ratio of foreign investment to GDP for Latin America during the first decade of the twentieth century was 2.7, the highest on record for any developing region, and that foreign investment accounted for around one-third of its capital stock.Google Scholar
- 18.Beth Simmons (1993) provides an interesting discussion of the events surrounding the establishment of the BIS.Google Scholar
- 19.The final act of the Bretton Woods Conference in 1944 called for the “liquidation of the BIS at the earliest possible moment” (Mikesell 1994). The debate about the future of the BIS after the Bretton Woods Agreement is discussed in Helleiner (1994).Google Scholar
- 27.The details of the initial quota determination for the IMF are discussed in Horsefield (1969). The preeminent position of the United States was dictated by the fact that the dollar was the only major currency that was convertible for current account transactions, while the US government was in possession of 55 percent of the global supply of gold in June 1945 (as reported in the BIS Annual Report of 1945).Google Scholar
- 33.Eichengreen (1992) reports that “dynamic instability” was also a concern among analysts during the gold exchange standard of the inter-war period in relation to potential pressures on the core gold standard countries arising from the accumulation of short-term claims by noncore countries.Google Scholar