In this book, a leading observer of the international financial system assesses official efforts to address the problem of financial crises in emerging markets. Professor Eichengreen describes the progress that has been made in limiting the frequency of crises and strengthening the international financial system. He also shows that initiatives in this area have unintentionally made life more difficult for the poorest countries. He therefore argues that efforts to limit the threat to the international financial system need to be linked to an increase in development assistance. Another place where official efforts have fallen short, the author argues is in creating new ways of resolving crises. He shows that official financing through the International Monetary Fund is part of the problem. The IMF's financial rescues allow investors to escape without losses, in turn encouraging them to lend without due regard to the risks. This only makes the international system more crises prone. That the IMF has repeatedly come under pressure to bail out crisis countries reflects the absence of other acceptable ways of resolving the financial difficulties of emerging markets. Not lending threatens to expose the international financial system to a disorderly and disruptive crisis. At the same time, radical new alternatives like an international bankruptcy court or international lender of last resort would create more problems than they solved-even if there was the political appetite for such ambitious schemes, which there is not. The author concludes that the best way to enhance the efficiency and stability of international financial markets is by pushing for changes to the provisions of loan agreements that will enhance the capacity of creditors and debtors to resolve financial problems on their own.
`Review from other book by this author It looks to me to be quite a tour de force, by the outstanding contemporary scholar of the 20th century history of the international monetary system.
John Williamson, Senior Fellow, Institute for International Economics
`Eichengreen's] book provides new and insightful analyses of how the gold standard worked and its role in the economic crisis of the interwar years.
David Hale, Chief Economist and Senior Vice President, Kemper Financial Services Corporation
`Anyone tempted to make historical parallels between the EMS and the gold standard should read Barry Eichengreen's scholarl account ... his book is written with a clarity that allows one to identify both elements of the gold standard that were unique and those that are common to any regime of fixed exchange rates.
Times Literary Supplement, 11/03/1993
`It is superb monetary history ... The great strength of Eichengreen's historical analysis is his enormously wide knowledge of, and sympathy for, economic and political conditions in all the major countries concerned ... a marvelous book. It is, in addition, beautifully written, and fully accessible to general readers (no mathematics, and lots of contemporary cartoons). A real pleasure to read, the work of a master economic historian.'
International Journal of Finance and Economics, 07/03/1996
2: Crisis Prevention
3: Crisis Management
4: Lessons of Recent Experience
5: The Way Forward
Appendix: A Chronology of Official Initiatives