Inequality, Growth and ‘Hot’ Money

Inequality, Growth and ‘Hot’ Money

New Directions in Post-Keynesian Economics series

Pablo G. Bortz

The growing levels of income inequality, an explosion of global financial flows, and a worldwide decline of economic growth have combined to challenge accepted economic wisdom. Utilizing a heterodox approach, Pablo G. Bortz provides a fresh look for understanding the interaction between these three factors while identifying challenges and possible alternatives for an expansionary and progressive economic policy.

Chapter 5: Financial flows, distribution and capital controls

Pablo G. Bortz

Subjects: economics and finance, development economics, post-keynesian economics


The chapter reviews major stylized facts about global financial flows and explores crises episodes after financial liberalization processes, such as the Mexican and the East Asian crisis. It presents a Kaleckian model to analyse the interaction between private external debt, income distribution and growth, which is empirically tested with Mexican and South Korean data. The chapter concludes with policy implication and alternative measures to deal with substantial capital inflows, including a novel capital control instrument, designed to foster productive investment and counteract debt-fuelled speculative investment.

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