United States foreign investment during the Bretton Woods period: Portfolio investment in western Europe.
Item
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Title
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United States foreign investment during the Bretton Woods period: Portfolio investment in western Europe.
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Identifier
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AAI9510733
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identifier
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9510733
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Creator
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Werner, Laurie Moroz.
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Contributor
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Adviser: Michael Edelstein
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Date
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1994
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Language
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English
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Publisher
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City University of New York.
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Subject
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Economics, History
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Abstract
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This study analyzes the determinants of United States private long-term portfolio investment in Western Europe during the period of the Bretton Woods international monetary system (1946-1971). This was an era when the U.S. played a dominant role in world economic and political affairs; the dollar was the numeraire of the adjustable peg exchange rate system and the major international reserve currency. The countries of the industrialized world experienced high rates of growth in output and trade. However, it is also considered to be a period of relatively low international capital mobility, especially for private portfolio capital, and saw frequent use of capital controls.;A number of hypotheses for the determinants of portfolio capital flows between the United States and Western Europe during this period were tested, using a portfolio balance model. The major conclusions were: (1) Portfolio investment by the U.S. in Western Europe was driven primarily by expectations for economic growth in the region, signalled by the high rate of capital formation. In Europe, the lack of internal capital mobility, due to restricted or underdeveloped domestic capital markets, created a strong demand for outside capital, and drew European borrowers to the comparatively open and less costly U.S. equity and loan markets. (2) The other principal determinant was the negative impact of the capital control programs imposed by the United States during the 1960s, specifically targeting financial capital flows to Western Europe. During the 1960s, the United States was clearly in imbalance with the rest of the world in terms of economic performance and balance of payments. However, because the United States believed that it could not easily devalue the dollar without fundamentally altering the world monetary system, capital controls were substituted for a devaluation of the dollar on capital transactions. There is evidence that, in the absence of controls, capital outflows to Western Europe could have increased rapidly. (3)Investment may also have been negatively affected by repercussions from the widespread defaults on foreign bonds during the 1930s, and by the market's perception of the misalignment of exchange rates between the U.S. and Europe.
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Type
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dissertation
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Source
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PQT Legacy CUNY.xlsx
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degree
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Ph.D.
