Sovereign Wealth Funds and the Efficient Management of the Wealth of Nations
2 Pages Posted: 22 Aug 2008 Last revised: 30 Oct 2008
Date Written: August 1, 2008
This comment considers arguments for and against stricter regulation of sovereign wealth funds (SWFs), either by tightening securities laws or increasing the tax burden on SWFs. Concerns about SWFs fall into two broad categories: fears that (1) investments will be politically, rather than financially, motivated, and that (2) to the extent that SWFs are politically motivated in their investment choices, they are inefficient investors that distort capital markets. While acknowledging these legitimate concerns, this comment explains how foreign equity investment by such funds may paradoxically promote global capital market efficiency.
Keywords: sovereign wealth funds, taxation
JEL Classification: H20, H87, K34
Suggested Citation: Suggested Citation