On the 2007 Foote Lecturer:
Dr. Kathryn Dominguez is Professor of Public Policy and Economics at the Gerald R. Ford School of Public Policy, University of Michigan. As well, she is a Research Associate at the National Bureau of Economic Research. She has written numerous articles on foreign exchange rate behaviour and is author of such publications as Exchange Rate Efficiency and the Behavior of International Asset Markets, and Does Foreign Exchange Intervention Work? (with Jeff Frankel). Prior to coming to the School of Public Policy, she taught at the Kennedy School of Government. She has taught at the Woodrow Wilson School of Public and International Affairs and the London School of Economics and worked as a research consultant for the Federal Reserve System, the International Monetary Fund, and the World Bank. At the Ford School, Kathryn teaches finance, macroeconomics and international economics. She received an A.B. from Vassar College in 1982 and her Ph.D. in Economics from Yale University in 1987. Dr. Dominguez sits on the editorial boards of the Journal of International Economics, the Journal of International Financial Markets, Institutions and Money and the Review of International Economics. She was the keynote speaker at the Research in International Economics and Finance Conference in Paris in 2004.
In her Foote Lecture, Dr. Dominguez explores the puzzling behaviour of international capital flows, including international reserve accumulation by developing countries. Economic logic suggests that capital should flow to where its return is highest, which in turn, ought to be where capital is scarce. Yet recent data suggests the opposite – net capital flows from developing countries to rich countries.
Dr. Dominguez undertakes to explain the accumulation of international reserves (and the more general phenomenon of capital flowing from poor countries to rich countries) by focusing on financial market development. She suggests that in countries with underdeveloped capital markets the government’s accumulation of reserves may act as a substitute for what would otherwise be private sector capital outflows. Effectively, these governments are acting as financial intermediaries, channeling domestic saving away from local uses and into international capital markets.
Lecture Copy (click here)