For instance, if there existed a global financial market, capital should flow from the developed countries to the developing ones. This is, however, not the case, as noted by Robert Lucas 19 , and the “Lucas puzzle” named after the author was formulated. There have been numerous works that attempted to resolve this puzzle. One of the most recent works, which presents a panel analysis of nearly a hundred countries in the period 1970-2000, has shown that the prevailing reason for the lack of capital flow from wealthy to poor countries are institutional factors. 20 or instance, improving the quality of operation of institutions in Peru to catch up with Australia would mean a four-fold increase in foreign investment, and improving the quality of operation of institutions in Turkey to catch up with the UK would increase foreign investment by 60%. Another puzzle, which over some time made challenging the fact that globalization of financial markets was actually taking place possible, was the “Feldstein-Horioka puzzle.” 21 Both authors in their famous  17  Too big to fail, too complex to fail. 18  “Rozwój systemu finansowego w Polsce w 2004 r.”,NBP Warsaw 2005, pp. 275- 286, 303-314. 19  Lucas R. “Why doesn’t Capital Flow from Rich to Poor Countries”, American Economic Review 80, 1990. 20  Alfaro L., Kalemni-Ozcan S., Volosovych V. “Why doesn’t Capital Flow from Rich to Poor Countries? An Empirical Investigation”, University of Houston Working Paper, November 2005.
In one of them, described as the  35  R. Husmann, F. Sturzenegger “Global imbalances or bad accounting? The missing dark matter in the wealth of nations”, Harvard University working paper, December 2005. 36  Examples of such estimations can be found in: S. Edwards “Is the U.S. Current Account Deficit Sustainable? And if not, How Costly Is Adjustment Likely to Be?”, NBER working paper 11541, 2005; Orderly or Disorderly Rebalancing?”, New York University Working Paper; M. Obstfeld, K. Rogoff “The Unsustainable US Current Account Deficit Position Revisited”, prepared for 12-13 July 2004 NBER conference on G-7 Current Account Imbalances: Sustainability and Adjustment; H. Faruqee et al. “Smooth Landing or Crash? Model Based Scenarios of Global Current Account Rebalancing”, NBER Working Paper 11583; O. Blanchard et al. „The U.S. Current Account and the Dollar”, NBER Working Paper 11137 and many others. 37  Roubini N. “Why Central Banks Should Burst Bubbles”, mimeo, Stern School of Business and Roubini Global Economics, January 2006. 38 Posen A. “Why Central Banks Should Not Burst Bubbles”, Institute for International Economics, Working Paper WP 06-1, January 2006. 39 Kohn D. “Remarks by Donald Kohn at Monetary Policy: A Journey from Theory to Practice, An ECB Colloquium held in honor of Otmar Issing”, 16 March, 2006. 14  BIS Review 60/2006  conventional monetary policy, the central bank focuses on stabilising the inflation, treats changes in asset prices as an exogenous process, and does not attempt to influence asset prices whatsoever.