TY - JOUR AU - Obstfeld,Maurice AU - Taylor,Alan M. TI - The Great Depression as a Watershed: International Capital Mobility over the Long Run JF - National Bureau of Economic Research Working Paper Series VL - No. 5960 PY - 1999 Y2 - May 1999 UR - http://www.nber.org/papers/w5960 L1 - http://www.nber.org/papers/w5960.pdf N1 - Author contact info: Maurice Obstfeld Department of Economics University of California, Berkeley 530 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: 510/643-9646 Fax: 510/642-6615 E-Mail: obstfeld@econ.berkeley.edu Alan M. Taylor Department of Economics University of Virginia Monroe Hall Charlottesville, VA 22903 Fax: (434) 982-2904 E-Mail: alan.m.taylor@virginia.edu M1 - published as Maurice Obstfeld, Alan M. Taylor. "The Great Depression as a Watershed: International Capital Mobility over the Long Run," in Michael D. Bordo, Claudia Goldin and Eugene N. White, editors, "The Defining Moment: The Great Depression and the American Economy in the Twentieth Century" University of Chicago Press (1998) AB - This paper surveys the evolution of international capital mobility since the late nineteenth century. We begin with an overview of empirical evidence on the fall and rise of integration in the global capital market. A discussion of institutional developments focuses on the use of capital controls and the pursuit of domestic macroeconomic policy objectives in the context of changing monetary regimes. A fundamental macroeconomic policy trilemma has forced policymakers to trade off among conflicting goals. The natural implication of the trilemma is that capital mobility has prevailed and expanded under circumstances of widespread political support either for an exchange-rate subordinated monetary policy regime (e.g., the gold standard), or for a monetary regime geared mainly toward domestic objectives at the expense of exchange-rate stability (e.g., the recent float). Through its effect on popular attitudes toward both the gold standard and the legitimate scope for government macroeconomic intervention, the Great Depression emerges as the key turning point in the recent history of international capital markets. ER -