The Asian Crisis,Gender, and the International Financial Architecture

This paper begins with an account of the Asian crisis, its creation and management by international financial institutions (the International Monetary Fund and the World Bank), and the gender impact of their stabilization and structural adjustment programs. Next we consider the new debate on reforming the IMF and the World Bank and restructuring the international financial architecture to prevent crises and manage them more effectively. Finally, we consider the gender ramifications of these changes. Since feminists have been absent from this debate, we examine issues essential to the formation of a gender-conscious international financial structure.     

A Tribute to Hyman P. Minsky

In this article, we examine financial crises after the Bretton Woods period using a new virulence index. After summarizing financial crises after Bretton Woods, we analyze aspects of four separate crises in a virulence index. The index includes measures of contagion, as well as impacts on economic, financial and social indicators. We find that financial crises have increased in virulence over time.     

新兴经济体与后金融危机时代IMF改革

全球金融危机爆发之后,国际货币基金组织不成功的援助措施使各国要求加快其改革进程。同时国际金融体系也在危机后重组,新兴经济体作为新兴力量在世界经济格局中崛起。新兴经济体成为一支独立的联合力量,并在IMF改革中提出自身的主张,要求获得更多话语权。新兴经济体由于其强大的经济实力和发展中国家的支持,促使发达国家依赖其进行IMF改革。同时,新兴经济体在参与IMF改革中也面临发达国家的压力,综合实力对比与金砖国家之间关系均影响着新兴经济体的合作。     

Positioning the World Bank

This article examines the rationale for the World Bank and explores whether its objective is best served by its current mix of activities. We are critical of the Bank's reliance on conditionality, and advocate evolution into a Knowledge Bank, which would lend with few conditions to countries with good policies and good institutions, and would concentrate on the provision of knowledge and technical assistance, rather than lending, in countries where the policy framework is poor. We also advocate an expansion in the Bank's role as a provider of global public goods; we critically examine the Banks role in relation to financial crises.     

International Financial Contagion: Why are Eastern Europe's banks not failing when everybody else's are?

While the Asian financial crisis spread to Russia and Brazil, the transition economies in Central and Eastern Europe (CEECs) are largely unaffected by international financial contagion. This is the more surprising considering that most economies have experienced severe banking sector problems in the past, that large bad loan ratios are still prevalent, that banking regulation and supervision are only slowly improving, and that stabilizing policies have slowly been eliminated. What insulated the CEECs from the recent wave of financial instability? To consider the counterfactual, we first provide a framework that links banking crises to financial deregulation. We then focus on a number of macro- and microeconomic factors, using data compiled from the IMF's International Financial Statistics, from the World Bank's World Debt Tables, and from the BIS's Consolidated International Banking Statistics. We first compare past experiences in CEECs with those in other emerging economies as a cross-sectional reference point. We then consider whether the situation in CEECs has changed since the last banking sector problems, in order to establish a reference point across time. Our results indicate that the factors leading up to past banking crises are generally different in CEECs from those in other emerging economies. However, in recent years, the characteristics of CEECs have become more similar to those of other emerging economies.     

Sir Leslie Melville: an Interview*

This interview with Sir Leslie Melville focuses on his career which began in 1924 when he was appointed Public Actuary of South Australia. He became the Commonwealth Bank's first economist in 1931. In 1944 he led the Australian delegation to the United Nations Monetary and Economic Conference at Bretton Woods and was the Australian Executive Director of the IMF/World Bank in the earty 1950s During the 1960s and 1970s he was chairman of the Tariff Board and of the Commonwealth Grants Commission He was appointed Professor of Economics in the University of Adelaide in 1929 and was Vice-Chancellor of the ANU between 1953 and 1960.     

Is the crisis problem growing more severe?

The crisis problem is one of the dominant macroeconomic features of our age. Its prominence suggests questions like the following: Are crises growing more frequent? Are they becoming more disruptive? Are economies taking longer to recover? These are fundamentally historical questions, which can be answered only by comparing the present with the past. To this end, this paper develops and analyses a data base spanning 120 years of financial history. We find that crisis frequency since 1973 has been double that of the Bretton Woods and classical gold standard periods and is rivalled only by the crisis-ridden 1920s and 1930s. History thus confirms that there is something different and disturbing about our age. However, there is little evidence that crises have grown longer or output losses have become larger. Crises may have grown more frequent, in other words, but they have not obviously grown more severe. Our explanation for the growing frequency and chronic costs of crises focuses on the combination of capital mobility and the financial safety net, including the implicit insurance against exchange risk provided by an ex ante credible policy of pegging the exchange rate, which encourages banks and corporations to accumulate excessive foreign currency exposures. We also provide policy recommendations for restoring stability and growth.
— Michael Bordo, Barry Eichengreen, Daniela Klingebiel and Maria Soledad Martinez-Peria     

THE WORLD BANK'S RESPONSE TO THE DEVELOPING COUNTRY DEBT CRISIS

The World Bank has responded to what it has perceived as two debt crises. The first is the highly publicized crisis in the middle-income, heavily indebted countries–mainly those in Latin America. The second has affected a set of about 20 much poorer African countries. The World Bank's responses to the two crises have been dissimilar as well. In the case of the heavily indebted, middle-income countries, whose debt is mainly to private creditors, the World Bank first responded with its Special Program of Action, beginning in 1983. Under the October 1985 Baker Plan, the World Bank was to increase its gross disbursements to these countries by 50 percent–a goal it has nearly met. Unfortunately, other creditors have not met Baker Plan goals, and so investment and growth in debtor countries has stagnated. The World Bank cannot continue providing a disproportionate share of financing needs. The World Bank has responded to the problems of the poorest debtor countries through its Special Program of Action for debt-distressed countries in Africa, and has coordinated its own concessional International Development Agency–soft loan window–lending with aid from other official creditors and donors.     

美国缘何反对国际货币基金组织扩大援助贷款规模

20世纪90年代以来，发展中国家成了国际金融危机的多发中心(尽管危机的源头不一定全在这些国家)，危机不仅给发展中国家带来了巨大的经济损失，也给整个国际经济环境增添了许多变数，因此，国际金融体系的重构，尤其是国际货币基金组织(IMF)改革问题，便成了近20年来国际社会普遍关心的话题。在IMF贷款问题上，主张取消IMF的长期贷款业务，不主张扩大国际金融危机救助规模，是目前美国的主流观点。由于美国是当今国际金融体系中的“霸主”，其意见将直接左右着国际金融体制的改革走向，所以美国在国际金融机构改革上的一些观点值得发展中国家关注。     

The IMF and the Liberalization of Capital Flows

We evaluate the claim that the International Monetary Fund precipitated financial crises during the 1990s, by pressuring countries to liberalize their capital accounts prematurely. Using data from a panel of developing economies from 1982–98, we examine whether the changes in the regime governing capital flows took place during participation in IMF programs. We find evidence that IMF program participation is correlated with capital account liberalization episodes during the 1990s. We verify the robustness of our results using alternative indicators of capital account openness. To determine whether decontrol was premature, we compare the economic and financial characteristics of countries that decontrolled during IMF programs with those of countries who did so independently, and find some evidence of IMF-led premature liberalizations.     

The exchange rate regime in Asia: From crisis to crisis

Prior to the Asian financial crisis, most Asian exchange rates were de facto pegged to the US Dollar. During the crisis, many economies experienced a brief period of extreme flexibility. A ‘fear of floating’ gave reduced flexibility when the crisis subsided, but flexibility after the crisis was greater than that seen prior to the crisis. Contrary to the idea of a durable Bretton Woods II arrangement, Asia then went on to slowly raise flexibility and reduce the role for the US dollar. When the period from April 2008 to December 2009 is compared against periods of high inflexibility, from January 1991 to November 1991 and October 1995 to March 1997, the increase in flexibility is economically and statistically significant. This paper proposes a new measure of dollar pegging, the “Bretton Woods II Score”. We find that Asia has been slowly moving away from a Bretton Woods II arrangement.     

Sudden stops, banking crises and investment collapses in emerging markets

We evaluate whether financial openness leaves emerging market economies vulnerable to the adverse effects of capital reversals (“sudden stops”) on domestic investment. We investigate this claim in a broad sample of emerging markets during the period 1976–2002. If the banking sector does not experience a systemic crisis, sudden stop events fail to have a significant impact on investment. Bank crises, on the other hand, have a significant negative effect on investment even in the absence of a contemporaneous sudden stop crisis. We also find that openness to capital flows worsens the adverse impact of banking crises on investment. Our results provide statistical support for the policy view that a strong banking sector which can withstand the negative fallout of capital flight is essential for countries that open their economies to international financial flows.     

国际金融体系的构造缺陷与亚洲金融危机的内在联系

近年来国际金融危机频发,这些危机的原因除了发生危机的国家的内在因素之外,更主要的还与其外在的整个国际货币金融体系存在着的巨大构造性缺陷息息相关。     

THE EFFECTS OF ALTERNATIVE EXCHANGE RATE REGIMES ON REAL EXCHANGE RATE VOLATILITY: EVIDENCE BASED ON A NEW DATASET

Do alternative exchange rate regimes affect short‐term real exchange rate volatility differently? The existing empirical evidence is quite mixed with slightly more papers supporting that they do. We show that such lack of consensus is mainly due to current literature limitations regarding the measurement of real exchange rates (RERs), the identification of exchange rate regimes (ERRs), and the control for the incidence of real and nominal shocks. To address these limitations, we construct a novel monthly dataset for 63 countries over the period 1946–2007, which includes market‐determined multilateral RER and a proxy for terms of trade. We find that ERRs indeed affect short‐term real exchange rate volatility differently. While the evidence is generally consistent with Mussa's sticky prices argument, we find that for nonadvanced countries in post‐Bretton Woods there exists a “U‐shape nominal flexibility puzzle of RER.” We also find evidence of a “short‐run RER volatility puzzle.” Having controlled for the incidence of real and nominal shocks, nonadvanced countries' RER volatility remains between 25% and 150% greater than that of the advanced economies. Moreover, the key literature finding that short‐term RER volatility is higher in Bretton Woods (BW) than in post‐Bretton Woods (PBW) for industrialized countries vanishes when using market‐determined multilateral RER instead of official bilateral RER. (JEL F31, F33, F41)     

An empirical characterization of the effects of public debt on economic growth

Based on a data set of 115 economies, this article empirically investigates the relation between public debt and economic growth. Using the World Bank’s classification for income groups, we initially find that those countries that present the lowest public debt are characterized by the highest economic growth, while the smallest growth rates are associated with the highest public debt. Nevertheless, this conclusion is tempered when we analyse the countries by income level: low-income countries have a different behaviour with respect to lower-middle, upper-middle and high-income countries. When using the IMF’s country classification, the results do not suggest a clear pattern in the public debt–economic growth nexus across different countries, but indicate a heterogeneous relationship between such key macroeconomic variables.     

The Vulnerability of ASEAN+3 Countries to International Financial Crises

This article focuses on the reaction of the Association of Southeast Asian Nations (ASEAN) economies to international financial shocks. The crises in emerging markets at the end of the last century underlined the significant vulnerability of the emerging ASEAN economies to international financial fluctuations and a lack of sustainability in their exchange rate regime. A structural VAR model is used to analyze the efficiency of the measures adopted by these countries after this episode of crisis in order to protect their economies against speculative attacks. The results reveal that the impact of the recent subprime crisis on emerging ASEAN countries is less significant than that observed in industrialized ones.     

The Economics of Regulating Cross-border Finance: Two New Views

For much of the 20th century the dominant view in macroeconomics was that cross-border finance needed to be regulated in order to balance the ‘impossible trinity’ first sketched by John Maynard Keynes in his two books on monetary theory. The dominant view in development economics during the same period was that cross-border capital flows need to be regulated for similar reasons but also to mobilize domestic resources for economic development. The view that capital mobility was something to be constrained fell out of favor in mainstream economics by the 1980s and 1990s. The experience of numerous financial crises in the past 20 years has spawned new economic theories that reintroduce the notion that cross-border finance can cause financial instability. One strand of new theory in this realm picks up from Ragnar Nurkse, Hyman Minsky, and others, and has become popular in many emerging market capitals and in the United Nations system. Another strand of new theory comes from modern welfare economics and is gaining ground in mainstream economics, central banks, and the Bretton Woods institutions. This paper examines these new breakthroughs and traces them to their origins in economic thought. Coupled with new econometric evidence on the efficacy of capital account regulation, the regulation of capital flows is justified now more than ever.     

Another Look at the Underlying Cause of the End of the Bretton Woods System: International Price Differences Perspective

In this study, the sustainability of the Bretton Woods system from the standpoint of purchasing power parity is discussed. The paper uses wholesale price indexes of the group of seven industrialized countries (G‐7) and examines when persistent price disparities among the countries occurred by applying the panel unit root tests. It is found that the price indexes of G‐7 countries began to diverge in the first half of the 1960s. Evidence from international price differences suggests that the price indexes may have signaled the breakdown of the Bretton Woods system before the inflation rate in the USA accelerated.     

Worldwide impact of IMF policies during the Asian crisis: who does the IMF help,creditors or crisis countries?

This paper examines the effects of International Monetary Fund (IMF) policy announcements on financial markets worldwide. We investigate reactions from stock, bond, foreign exchange and futures markets and banking and financial companies during the Asian crisis. We explore the impact of IMF bailouts not only on crisis countries, but also on main creditor countries. We study the impact of local governments’ and public responses in crisis countries to account for interaction between the IMF and local parties. We show IMF involvement and local governments’ co-operation actually helps crisis countries but not creditors. We show that in crisis countries, financial markets generally react unfavourably to their governments’ initial demands for IMF assistance, while compliance of the crisis countries with the IMF policy action is commonly perceived as good news. Financial markets in crisis countries react negatively to prolonged negotiations and government actions against IMF policy. Creditor countries’ financial markets are not responsive to IMF actions in crisis countries. We discuss policy implications of findings.     

ASIA'S ROLE IN THE GLOBAL ECONOMIC ARCHITECTURE

The global economic and financial landscape has been transformed over the past decade by the growing economic size and financial power of emerging economies. The new Group of Twenty summit process, which includes the largest emerging economies, has established high‐level international policy cooperation in this new setting. This article argues that effective global economic governance will also require changes in key global organizations—such as the International Monetary Fund, World Bank, World Trade Organization, and the Financial Stability Board—and closer collaboration between global and regional organizations. We suggest that federalism be introduced on a global scale by creating hierarchies of global and regional organizations with overlapping ownership structures in various functional areas (as is already the case with the World Bank and regional development banks in the area of development finance). Asia could contribute to this transformation by building effective institutions to promote macroeconomic and financial stability and deepen regional trade and investment integration. Similar logic could be applied to a broader issue of providing international public goods, such as environmental and climate protection, communicable disease control, and disaster risk management. (JEL F02, F13, F33, F55, O59)