Report
A return to financial autarky would reduce the risk of crisis, but would have an extremely impoverishing effect
Free movement of capital increases the risk of financial crisis and of financial contagion between countries. This can be seen nowadays, with volatile capital flows in emerging countries and capital outflows from the euro zone. So stopping capital flows would be stabilising from this viewpoint. But a return to financial autarky would require each country to finance its investments with its own national savings. In the euro zone, we can already see the cost of this situation , with the end of capital mobility between euro-zone countries since 2010. For emerging countries, being forced to finance their investment with their national savings without being able to borrow from OECD countries would lead to a very significant decline in capital accumulation and in income catch-up. Even though a return to financial autarky would prevent crises from spreading , it is therefore not an option.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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