Liberalization, Financial Instability and Economic Development

Yılmaz Akyüz

Description

A serious evaluation of economic interdependence in a finance-driven world from a development perspective, offering national and regional policy options to help the Global South improve its control over its own economic space.

Weighing up the costs and benefits of economic interdependence in a finance-driven world, this book argues that globalization, understood and promoted as absolute freedom for all forms of capital, has been oversold to the Global South, and that the South should be as selective about globalization as the North. ‘Liberalization, Financial Instability and Economic Development’ challenges the orthodoxy on the link between financial deepening and economic growth, as well as that between the efficiency of financial markets and the benefits of liberalization. Ultimately, the author urges developing countries to control capital flows and asset bubbles, preventing financial fragility and crises, and recommends regional policy options for managing capital flows and exchange rates.

Introduction; PART I: LIBERALIZATION, STABILITY AND GROWTH; Chapter 1: Financial Liberalization: The Key Issues; Chapter 2: Managing Financial Instability in Emerging Markets: A Keynesian Perspective; Chapter 3: From Liberalization to Investment and Jobs: Lost in Translation; Chapter 4: Exchange Rate Management, Growth and Stability: National and Regional Policy Options in Asia; Chapter 5: Reforming the IMF: Back to the Drawing Board; PART II: THE GLOBAL ECONOMIC CRISIS AND DEVELOPING COUNTRIES; Chapter 6: The Current Global Financial Turmoil and Asian Developing Countries; Chapter 7: The Global Economic Crisis and Asian Developing Countries: Impact, Policy Response and Medium-Term Prospects; Chapter 8: The Staggering Rise of the South?

Sujets

• General officer
• Microeconomics
• Economics
• General
• Finance

Informations

• Publié par: Anthem Press
• Date de parution: 01 mai 2014
• Nombre de lectures: 1
• EAN13: 9781783082407
• Langue: English
• Poids de l'ouvrage: 2 Mo

Extrait

Liberalization, Financial Instability and Economic Development

Anthem Frontiers of Global Political Economy

TheGlobal Political EconomyAnthem Frontiers of series seeks to trigger and attract new thinking in global political economy, with particular reference to the prospects of emerging markets and developing countries. Written by renowned scholars from different parts of the world, books in this series provide historical, analytical and empirical perspectives on national economic strategies and processes, the implications of global and regional economic integration, the changing nature of the development project, and the diverse globaltolocal forces that drive change. Academics featured in the series extend earlier economic insights to provide fresh interpretations that allow new understandings of contemporary economic processes.

Series Editors

Kevin Gallagher – Boston University, USA Jayati Ghosh – Jawaharlal Nehru University, India

Editorial Board

Stephanie Blankenburg – School of Oriental and African Studies (SOAS), UK HaJoon Chang – University of Cambridge, UK WanWen Chu – RCHSS, Academia Sinica, Taiwan Léonce Ndikumana – University of MassachusettsAmherst, USA Alica Puyana Mutis – Facultad Latinoamericana de Ciencias Sociales (FLASCOMéxico), Mexico Matías Vernengo – Banco Central de la República Argentina, Argentina Robert Wade – London School of Economics and Political Science (LSE), UK Yu Yongding – Chinese Academy of Social Sciences (CASS), China

Liberalization, Financial Instability and Economic Development

Yılmaz Akyüz

Anthem Press An imprint of Wimbledon Publishing Company www.anthempress.com

This edition first published in UK and USA 2014 by ANTHEM PRESS 75–76 Blackfriars Road, London SE1 8HA, UK or PO Box 9779, London SW19 7ZG, UK and 244 Madison Ave #116, New York, NY 10016, USA

A copublication with South Centre POB 228 Chemin du Champ d’Anier 17 1211 Geneva 19 Switzerland

Copyright © South Centre 2014

The author asserts the moral right to be identified as the author of this work.

All rights reserved. Without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior written permission of both the copyright owner and the above publisher of this book.

British Library CataloguinginPublication Data A catalogue record for this book is available from the British Library.

Library of Congress CataloginginPublication Data Akyüz, Yilmaz. Liberalization, financial instability and economic development / Yilmaz Akyüz. pages cm. – (Anthem frontiers of global political economy) Includes bibliographical references. ISBN 9781783082292 (hardcover : alk. paper) – ISBN 9781783082629 (papercover : alk. paper) 1. Finance. 2. Financial crises. 3. Finance–Developing countries. 4. Economic development–Developing countries. I. Title. HG173.A378 2014 332’.042–dc23 2014008272

ISBN13: 978 1 78308 229 2 (Hbk) ISBN10: 1 78308 229 1 (Hbk)

Cover image: Peter Stuckings / Shutterstock.com

This title is also available as an ebook.

To Bernie

Introduction

C

O

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TEN

TS

PART ONE LIBERALIZATION, STABILITY AND GROWTH

Chapter I Financial Liberalization: The Key Issues

A. B. C. D. E. F. G. H. I.

Introduction Interest Rates and Savings Financial Liberalization and Deepening Allocative Efficiency Productive Efficiency and Cost of Finance Regulation of Finance and Financial Stability Options in Financial Organizations External Liberalization and Financial Openness Conclusions

Chapter II Managing Financial Instability in Emerging Markets: A Keynesian Perspective

A. B. C. D. E. F. G. H.

Introduction The Keynesian Instability Hypothesis and Financial Cycles Investment and Jobs over the Financial Cycle The Policy Problem Capital Flows and Countercyclical Monetary Policy Reserve Accumulation as SelfInsurance Financial Regulations, Capital Controls and Risk Management Conclusions

Chapter III From Liberalization to Investment and Jobs: Lost in Translation

A. B. C. D.

Global Economic Integration and the Labor Market Capital Formation, Growth and Employment Managing Profits and Accumulation Macroeconomic Policy: What Policy?

1

19 19 22 24 27 29 32 37 45

51 52 55 56 59 61 62 66

73 76 88 92

viii

E. F.

LIBERALIZATION, FINANCIAL INSTABILITY AND ECONOMIC DEVELOPMENT

Financial Instability, Investment and Employment Policy Priorities

Chapter IV Exchange Rate Management, Growth and Stability: National and Regional Policy Options in Asia

A. B. C. D. E. F. G.

Introduction Exchange Rate, Trade and Growth Capital Flows, Exchange Rates and the Real Economy Managing Capital Flows and Exchange Rates Recent Experience in Asia Regional Monetary Cooperation for Stability Conclusions

Chapter V Reforming the IMF: Back to the Drawing Board

A. B. C. D. E. F. G. H. I.

Introduction The Original Rationale and the Postwar Evolution of the IMF Mission Creep into Development Finance and Policy Trespassing in Trade Policy Crisis Management and Resolution: Bailouts or Workouts? Restructuring IMF Lending and Supplementing Resources Ineffectiveness and Asymmetry of Fund Surveillance Governance: Making the Fund a Genuinely Multilateral Institution Summary and Conclusions

PART TWO THE GLOBAL ECONOMIC CRISIS AND DEVELOPING COUNTRIES

97 104

117 119 131 135 145 152 165

183 184 189 191 194 198 202 207 210

Chapter VI The Current Global Financial Turmoil and Asian Developing Countries

A. B. C. D. E. F.

Introduction The Role of Finance in the Recent Global Expansion Expansion and Crisis in the United States Capital Flows and Vulnerability in Asia External Shocks and Policy Options in Asia Conclusions

223 224 225 231 241 249

CONTENTS

Chapter VII The Global Economic Crisis and Asian Developing Countries: Impact, Policy Response and MediumTerm Prospects

A. B. C. D. E. F.

Introduction The Great Financial Bubble, Global Expansion and Imbalances Asian Vulnerabilities and Spillovers from the Crisis Policy Response and Recovery MediumTerm Prospects and Policy Challenges Conclusions: Policy Issues and Lessons

Chapter VIII The Staggering Rise of the South?

A. B. C. D. E. F. G. H. I.

Introduction and Summary The Growth Record Global Economic Conditions Impact on Macroeconomic Balances in DEEs Impact on Growth in DEEs The Role of South–South Trade and China Crisis and Recovery Sustainability and Vulnerabilities Conclusions: Reconsidering Policies and Strategies

i

x

259 260 264 274 278 285

293 296 297 302 306 309 314 316 321