Suchergebnisse

This article offers a monetary perspective on capital flows and the Eurozone's north-south divide. It argues that finance-centric narratives in comparative political economy rightly emphasize financial instability in the periphery, but that the role of capital flows therein requires clarification. The article draws on post-Keynesian monetary theory, coherent accounting, and balance-of-payments data to make three points. First, the focus on the financial account as a driver of current accounts should be abandoned in favor of an analysis of gross capital flows. Gross flows need not stem from excess savings in core countries and can be independent from trade flows. Second, explanations of financial instability in the periphery should go beyond bank flows and consider speculative portfolio flows into bond markets and foreign direct investment into real estate. Third, rising spreads in the periphery during the Eurozone crisis and the outbreak of the pandemic were not triggered by balance-of-payments problems but by a reversal of speculative bond flows. Comparative political economy should thus dedicate more attention to institutions that render peripheral countries susceptible to speculative flows into asset markets.

This paper provides a monetary perspective on capital flows and their effects on geographically uneven economic dynamics. Contributing to debates on global imbalances and the international dimension of financialisation, the paper applies heterodox theories of endogenous money creation, asset pricing, and balance sheet fragility to capital flows across regions. Three theoretical claims are made and illustrated through coherent balance-sheet accounting and empirical examples. First, trade imbalances usually are financed endogenously by net inflows that need not originate from surplus regions. Second, bank inflows are not a precondition for local credit creation, but certain types of gross financial flows can contribute to destabilising financial booms through exchange rate appreciation and asset price inflation. Third, sudden stops in capital flows can be entirely unrelated to current account deficits but may trigger financial instability, resulting in negative gross flows rather than increased outflows. For debates in economic geography and heterodox economics, the arguments imply that the focus on surplus countries as originators of destabilising flows can be misleading and that global financial centres are likely to be more important. More attention is needed to gross portfolio and FDI flows into asset markets rather than bank flows and net flows.