Internationalisation of Financial Markets [E-Book]: Some Implications for Macroeconomic Policy and for the Allocation of Capital / Mitsuhiro Fukao and Masaharu Hanazaki
Fukao, Mitsuhiro.
Hanazaki, Masaharu.
Paris : OECD Publishing, 1986
100 p. ; 21 x 29.7cm.
OECD Economics Department Working Papers ; 37
Full Text
This paper analyses the effects of the internationalisation of financial markets on the conduct of macroeconomic policy and the allocation of capital. It first examines the increased integration between domestic and external (or "Euro") financial markets and the recent tendency towards convergence of real interest rates among financially open countries. After briefly touching on the macro policy consequences of financial internationalisation, the paper then deals with long-term implications for the international allocation of capital, with special emphasis on the existence of tax distortions. Using estimated tax wedges for business investment and the supply block of the INTERLINK system, it shows that, under integrated financial markets, the existing tax distortions could generate a large imbalance in the net external asset position which involves a significant welfare cost ...