Raghu Rajan on Why are poor countries financing the rich?

Youngest IMF chief economist Raghuram Rajan, the author of the important book Saving Capitalism from the Capitalists, discusses global imbalances in savings, investments and economic growth.

Podcast from the University of Chicago's Graduate School of Business 6 Oct 2006. Part of the Global Leadership Series.

Presents and attempts to explain some recent counter-intuitive findings about global capital movements including: 1. evidence that capital does not flow from rich countries to poor countries, 2. countries that get the most capital, grow the least, 3. countries growing the fastest are sending the most capital outside the country, 4. underdeveloped financial markets mean limited ability in a country to reinvest your own savings or foreign savings, 5. in countries with weak financial systems, more income typically means more savings, 6. many countries that are growing fast often don't need foreign capital because they are generating it themselves, they are generating their growth from domestic savings.......it's how much a country generates in savings that's important, country's that can make growth spurts long-term sustainable develop.....the importance of keeping a country's exchange rate from becoming overvalued....Asia economies avoided overvalued exchange rates in their growth....extreme undervaluation is not good either....a balance needs to be struck between exposure to international capital, essential to developing functioning financial markets, while protecting economy from economic shocks transferred through international capital....

[Recent posts brought this issue up in Brad DeLong's Blog and Economists' View Blog ]