A bloated and dysfunctional financial system had misallocated capital and, rather than managing risk, had actually created it.

State controlled banks allocate capital.

But this vigorous attempt to reduce interest rates is distorting capital allocation.

Before World War II, venture capital investments (originally known as development capital ) were primarily the domain of wealthy individuals and families.

Capital controls, whatever their benefits in terms of mitigating the risks associated with volatile capital flows, are costly in a variety of ways.

The single market principle was supposed to promote the efficient allocation of capital and labor.

As a result, financial markets, which are supposed to manage risk and allocate capital efficiently, created risk and misallocated wildly.

But Chinese policymakers should also recognize the significant risks inherent in relaxing capital controls.

More importantly, the crisis highlighted the risks associated with high dependence on foreign capital.

The latter course risks the worst of all worlds all of the costs of capital controls and all of the domestic policy complications from volatile capital flows, but few of the potential benefits of foreign capital.

As a result, market oriented interest rate reform is now needed to help optimize capital allocation and support the development of China s financial market, thereby laying the groundwork for future capital account and exchange rate liberalization.

However, barring any major economic bumps, the changes will have a positive impact, as capital allocation becomes more efficient.

Since high risk premiums on government bonds endanger the capital adequacy of banks, half a solution is not enough.

Indeed, its risk free status was embedded in the European Union regulatory framework, which allows banks to hold large volumes of any eurozone country s public debt without having to put aside any capital to cover potential losses.

Initial capital

While the right policies cannot eliminate risk, they can ameliorate the cost benefit tradeoff from capital flows.

The resulting perception that currency risk was declining bolstered capital inflows further.

Most economists in China seem to support the PBOC s stance, citing the potential benefits of capital account liberalization. But Chinese policymakers should also recognize the significant risks inherent in relaxing capital controls.

What Krugman is really after ( though he can t quite come out and say this ) is for the government to take charge of the allocation of capital.

Interest rate liberalization together with other financial reforms would help to improve the efficiency of capital allocation and to optimize the economic structure.

As above, firm value is enhanced when, and if, the return on capital exceeds the cost of capital.

Internationally agreed rules stipulate that banks must create capital reserves commensurate to the risks that they take when they invest depositors savings.

The Art of Capital Flight

Damming Capital

The Capital Flow Conundrum

Capital flows and remittances

E. Financial capital and resilience

The portion of capital inflows that is not re exported represents net capital inflows.

Commercial banks could hold them without setting aside any capital reserves, and the European Central Bank (ECB) accepted them on equal terms at its discount window.

The Siren Song of Capital Controls

Investment and private flows

(o) Working Capital Fund

Brazil has been aggressive in terms of capital restrictions, twice increasing its tax on financial inflows.

Today, the global surfeit of liquidity has once again resulted in comparably low risk premia and a resurgence of capital flows, despite a broad consensus that the world faces enormous risks (including the risks posed by a return of risk premia to more normal levels.)

The adjustment process will take many years, and, until policy credibility is fully restored, capital flight will continue, requiring massive amounts of official finance.

व श व क प ज क र ख फ र ट यर क ओर

Jacqueline Novogratz on patient capitalism

The reason lies in capital movements.

Finally, there is the path of public capital.

Surviving the Great Capital Flood

Raising capital is expensive.

The Temptation of China s Capital Account

List of tables

This is why equity capital held by financial institutions typically is more than twice as expensive as debt capital and why these institutions try to minimize its use.

Moreover, Li has called upon the banking sector to reinvigorate idle capital and allocate incremental capital more effectively.