Reversal Of Capital Account Globalization Likely To Persist: UBS

The reduced capital inflow into fixed exchange rate regimes could imply that the collapse in capital account globalization since the crisis is not over, notes UBS.

Paul Donovan and Sophie Constable of UBS in their February 24, 2016 research note titled: “The continued collapse of globalization” note global capital flow collapsed as a share of global GDP following the global financial crisis.

Capital is more scarce relative to trade

Donovan and Constable reckon international capital is harder to come by. The analysts reckon countries without sufficient domestic capital will have to fight to finance their current account deficits, particularly if they are unattractive locations for real world direct investment. They believe the fourth industrial revolution losers would be especially vulnerable here.

As...