The nature of capitalist money and the financial links between debt-led and export-led growth regimes

Abstract

The aim of this article is to develop a consistent theoretical approach to thefinancial links between the so-called debt-led (DLG) and ‘export-led’ (XLG)growth regimes. Assuming the endogenous supply of money and theunstable dynamics of financial markets, the leveraging process of DLGregimes is taken as an inherent dynamic of developed domesticfinancial systems, without the need of any external capital inflow.Foreign inflows are not a requisite for such expansions; however,attracted by high expected returns, they can play a key role in fuelingDLG cases. Alternatively, current-account imbalances are not an indicatorof the international financial flows but rather a side effect stemmingfrom the productive, financial and trade links between DLG and XLGcountries. Based on this approach, we study the relationship betweenchanges in credit and current-account balances in several countriesbefore and after the crisis of 2008. Both the observed generalrelationship of these variables for most of the countries, as well as somespecific national cases ‘out of the norm’ are fundamental forunderstanding the national and international financial links betweenDLG and XLG models