INTERNATIONAL CAPITAL MOVEMENTS - HOW SHOCKING ARE THEY

International linkages of national capital markets have strengthened i n recent years, as many nations have relaxed restrictions over their f inancial markets and as technical advances have speeded communications . While some controls over capital movements remain, the degree of int egration is impressive - and has been for years, well before it became fashionable to speak of ''globalization.'' This article examines the volatility of capital movements relative to national outputs for 11 in dustrial countries. The author finds that the volatility of capital fl ows appears to be no greater now than in the late 1950s. He also finds that while countries experience external economic shocks quite freque ntly, the majority of shocks in most countries seem to originate in th e goods markets rather than in the capital markets, although the very largest shocks have apparently been in capital markets. Contrary to co nventional wisdom, capital-movement shocks are administered as frequen tly by funds invested in some form of long-term assets as by funds inv ested in short-term assets, although the largest swings occur in short -term capital. The article concludes with some policy recommendations.