Capital flows and geographically uneven economic dynamics: a monetary perspective

Research output: Working paper/PreprintWorking paper


This paper provides a monetary perspective on capital flows and their effects on geographically uneven economic dynamics. It draws on the heterodox theories of endogenous money creation, asset pricing, and balance sheet fragility, and utilises coherent accounting. Three main claims are made. First, trade imbalances usually are financed endogenously by bank flows that need not originate from surplus regions. Second, capital inflows do not directly drive local credit creation, whereas certain types of gross financial flows can contribute to destabilising financial booms through exchange rates 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 outflows. For debates in economic geography and heterodox economics on the international sources of financialisation, the argument implies 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 net flows and loan flows.
Original languageEnglish
PublisherFinGeo: Global Network on Financial Geography
Number of pages28
ISBN (Electronic)2515-0111
Publication statusPublished - Mar 2021

Publication series

NameFinancial Geography Working Paper Series
PublisherFinGeo: Global Network on Financial Geography
ISSN (Electronic)2515-0111


  • Gross capital flows
  • balance-of-payments
  • current account imbalances
  • uneven development
  • financial geography
  • global finance
  • financial centres
  • sudden stop
  • Minsky


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