The industrialized world has recently witnessed a dramatic increase in the volume of international capital movements, in the forms of borrowing and lending, bond transactions and foreign direct investment. Many non-OECD countries have also embarked on extensive programs of capital market liberalization. Papers in this volume--the proceedings of a CEPR joint conference with the Bank of Israel and Tel Aviv University's Pinhas Sapir Center for Development--examine the implications of these developments for economic fluctuations and fiscal and monetary policies under alternative exchange rate regimes, as well as other topics of contemporary interest.