Towards an International Capital Market?

Abstract

This paper discusses the growth and development of the international capital market during the past decade, considers whether it can be said that a genuine international capital market now exists, and discusses the advantages and disadvantages of one integrated capital market transcending national economies. ‘Capital markets’ involve the mobilisation of savings by those who want or are willing to accept financial claims, for investment (or consumption) by others who are willing to accept financial liabilities or share their equity. Capital markets are usually distinguished from ‘money markets’ by the maturity of the claims that are traded there, the capital market referring to transactions in claims with maturities in excess (definitionally) of one year, and usually in excess of five years, although any clear distinction between the two must be arbitrary, for these markets may be, and typically are, closely related. Medium-term bank lending, for example, involves maturities in excess of one year but ordinarily does not give rise to marketable securities.