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Once upon a time, economists saw capital account liberalization--the free and unrestricted flow of capital in and out of countries--as unambiguously good. Good for debtor states, good for the world economy. No longer. Spectacular banking and currency crises in recent decades--from Latin America in the early 1980s to Scandinavia a decade later to Mexico, Southeast Asia, Russia, and, quite lately, Argentina--have shattered the consensus. In this remarkably clear and pithy volume, one of Europe's leading economists examines these crises, the reforms being undertaken to prevent them, and how global financial institutions might be restructured to this end.
Jean Tirole first analyzes the current views on the crises and on the reform of the international financial architecture. Reform proposals often treat the symptoms rather than the fundamentals, he argues, and sometimes fail to reconcile the objectives of setting effective financing conditions while ensuring that a country "owns" its reform program. A proper identification of market failures is essential to reformulating the mission of an institution such as the IMF, he emphasizes. Next he adapts the basic principles of corporate governance, liquidity provision, and risk management of corporations to the particulars of country borrowing. Building on a "dual- and common-agency perspective," he revisits commonly advocated policies and considers how multilateral organizations can help debtor countries reap enhanced benefits while liberalizing their capital accounts.
Based on the Paolo Baffi Lecture the author delivered at the Bank of Italy, this refreshingly accessible book is teeming with rich insights that researchers, policymakers, and students at all levels will find indispensable.
"An insightful contribution to the expanding economics research that reexamines the role of the International Monetary Fund in emerging markets and financial crises."--Choice
| Acknowledgments | p. vii |
| Introduction | p. ix |
| Emerging Markets Crises and Policy Responses | p. 1 |
| The pre-crisis period | p. 1 |
| The crisis | p. 7 |
| IMF reforms, regulatory changes, and private sector innovations | p. 18 |
| The Economists' Views | p. 23 |
| Consensus view | p. 23 |
| Conflicting advice and the topsy-turvy principle | p. 29 |
| "Unrealistic" encroachments of sovereignty | p. 36 |
| Theories | p. 36 |
| Outline of the Argument and Main Message | p. 47 |
| The problem of a standard borrower | p. 48 |
| Why is external borrowing different? | p. 48 |
| Institutional and policy responses to market failure | p. 50 |
| Liquidity and Risk-Management in a Closed Economy | p. 53 |
| Corporate financing: key organizing principles | p. 53 |
| Domestic liquidity provision | p. 70 |
| Identification of Market Failure: Are Debtor Countries Ordinary Borrowers? | p. 77 |
| The analogy and a few potential differences | p. 77 |
| A dual-agency perspective | p. 81 |
| The government's incentives | p. 86 |
| Discussion | p. 88 |
| A common-agency perspective | p. 92 |
| Implications of the Dual- and Common-Agency Perspectives | p. 97 |
| The representation hypothesis | p. 97 |
| Policy analysis | p. 102 |
| Cross-country comparisons | p. 108 |
| Is there a need for an international lender of last resort? | p. 110 |
| Institutional Implications: What Role for the IMF? | p. 113 |
| From market failure to mission design | p. 114 |
| Governance | p. 116 |
| Conclusion | p. 129 |
| References | p. 131 |
| Index | p. 145 |
| Table of Contents provided by Syndetics. All Rights Reserved. |
ISBN: 9780691099859
ISBN-10: 0691099855
Series: International Studen
Audience:
Professional
Format:
Hardcover
Language:
English
Number Of Pages: 168
Published: 21st July 2002
Publisher: Princeton University Press
Country of Publication: US
Dimensions (cm): 21.6 x 14.0
x 2.54
Weight (kg): 0.34
