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It is now more than two years
since the sub-prime lending crisis in the US mortgage
sector came to light. The unprecedented financial
crisis in the developed world brought with it the
end of the illusion of the market being ''efficient''.
This section presents papers and articles that seek
to explain the causes and consequences of the U.S.
sub-prime mortgage crisis. Through a critique of the
underlying structure and dynamics of deregulated finance,
they analyse how this crisis led to a generalized
credit crunch in other financial sectors and ultimately
affected the world economy at large. There are also
theoretical papers that explore the related issues,
all of which provoke a fundamental rethink on financial
liberalisation in order to reduce the systemic and
global instability associated with it.
From
Marx to Morgan Stanley: Inequality and financial crisis
Michael Lim Mah-Hui and
Khor Hoe Ee (June 14,
2012)
Despite robust growth,
rising inequalities and financial instability have
affected many countries. This is a result of skewed
distribution of economic output between labour and
capital favouring the latter. Household consumption
has been falling along with rising savings by the
rich. This tension between declining consumption and
rising savings is 'resolved' by the financial system
through the recycling of funds from the rich minority
to the average household in the form of credit. At
the global level, the tension is 'resolved' through
recycling 'excess savings' from China to the US, adding
to the debt and asset bubble in the US.
The Myth of the ''Sub-prime'' Crisis
Prabhat Patnaik (August
13, 2010)
The author argues that
blaming ''sub-prime lending'' for the recent global
financial crisis is erroneous. Sub-prime crisis as
the cause is a myth that is being sold quite successfully
to the world. The real reason for the crisis is the
collapse of the speculative bubble in the real estate
market which was bound to happen irrespective of the
identity of the borrowers.
Should Greece Follow Estonia's Example?
Rainer Kattel
(April 21, 2010)
One of the suggestions
regarding Greece's current woes is that it should
cut its public spending, just like Estonia. But, Estonia's
massive cut in public spending, praised by both the
EC and the IMF, has resulted in a 15% contraction
in Estonia's GDP in 2009, as compared to only 2% of
Greece. Such simplistic fiscal retrenchment may thus
worsen matters for Greece.
The Global Financial Crisis and After: A New Capitalism?
Luiz Carlos Bresser-Pereira
(January 7, 2010)
The 2008 global financial
crisis was the consequence of the process of financialisation
and of the hegemony of a reactionary ideology, namely,
neoliberalism. While the institutions or regulations
set in place following the stock-market crash of 1929
and the Great Depression of the 1930s could have avoided
the present financial crisis, it failed to do so because
a coalition of rentiers and ''financists'' achieved
hegemony and refused to regulate various financial
innovations. However, from this crisis a new capitalism
will emerge, characterised, among other things, by
the tendency to improve democracy by making it more
social and participative.
The Limits of Minsky's Financial Instability Hypothesis
as an Explanation of the Crisis
Thomas I. Palley
(December 14, 2009)
In this paper the author
argues that the interpretation of the financial crisis
as a Minsky crisis is misleading, as the processes
identified in Minsky's financial instability hypothesis,
even when playing a critical role in the crisis, are
part of a larger economic drama involving the neoliberal
growth model. Interpretation of the financial crisis
as a purely financial crisis--in the spirit of a pure
Minsky crisis--and the attendant policy prescription
of simply fixing the financial system may, in fact,
worsen stagnation.
The Financial Crisis One Year on
Jayati Ghosh
(September 16, 2009)
The enormous bailouts
carried out by governments to avert a global economic
collapse after the Lehmann Brothers debacle should
have been accompanied by much more systematic and
aggressive attempts at financial regulation. This
opportunity wasted by governments will prove to be
expensive. We should brace ourselves for an even worse
replay of the financial crisis in the foreseeable
future.
Financial and Monetary Issues as the Crisis Unfolds
James Galbraith
(August 26, 2009)
On June 15 and 16,
2009, the working group on financial and monetary
issues of Economists for Peace and Security and the
Initiative for Rethinking the Economy met in Paris
for a closed discussion of the ongoing crisis and
reform proposals, including the new initiatives of
the G-20 and the Obama administration. This memorandum
provides a structured summary of the major points
of the meetings. It reflects in general terms the
center of gravity of the views expressed, drawing
on the expertise and careful reflection of the specialists
and experts who were there.
The Revenge of the Market on the Rentiers: Why Neo-Liberal
Reports of the End of History Turned Out to be Premature
(Revised Version)
Jose Gabriel Palma
(July 25, 2009)
Starting from the perspective
of heterodox Keynesian-Minskyian-Kindlebergian financial
economics, this paper begins by highlighting a number
of mechanisms that contributed to the current financial
crisis. However, the paper then proceeds to argue
that perhaps more than ever the 'macroeconomics' that
led to this crisis only makes analytical sense if
examined within the framework of the political settlements
and distributional outcomes in which it had operated.
The paper concludes that the current financial crisis
is the outcome of something much more systemic, namely
an attempt to use neo-liberalism (or, in US terms,
neo-conservatism) as a new technology of power to
help transform capitalism into a rentiers' delight.
Although rentiers did succeed in their attempt to
get rid of practically all fetters on their greed,
in the end the crisis materialised when 'markets'
took their inevitable revenge on the rentiers by calling
their (blatant) bluff.
What is Minsky All About, Anyway?
Korkut Ertürk
& Gökcer Özgür (May 16, 2009)
The current financial
crisis has been interpreted as the fulfillment of
Hyman P. Minsky's predictions by many, while others
have opposed this suggestion. In this paper, the author
tries to sketch out an alternative understanding of
Minsky as an evolving research agenda. He argues that
if Minskyan work means solely his own writings and
their restatement, then, those who refute this current
crisis as Minsky's prediction are probably right –
one cannot help but focus on what is different about
the current crisis. But, if instead, Minksyan refers
to an evolving literature that emanate from but transcend
his work, their arguments miss their mark.
A
Comparison of Two Cycles in the World Economy: 1989-2007
Korkut
Boratav (April 21, 2009)
The paper compares
and analyses some of the quantitative indicators of
the world economy during the 1989-2007 years. The
global economic system is studied on the basis of
the division of an imperialist system consisting of
the metropole and the periphery, and their major sub
groups and is divided into two cycles, namely 1989-1997
and 1998-2007. The paper concludes that nature of
external linkages on the basis of which peripheral
economies confronted the 2008-2009 upheaval determines
their degree of vulnerability vis a vis the international
crisis.
G20:
How Not to Rule the World
Jayati
Ghosh
(April 04, 2009)
The communiqué
released after the much talked about G-20 summit is
deeply disappointing. The G20 has not produced anything
like the response needed to pull the world economy
out of this unprecedented mess.m has experienced since
the 1930s.
Recommendations of the UN Expert Commission on Finance
(March
31, 2009)
This is the preliminary
recommendations of the UN Expert Commission on Finance,
constituted by the President of the UN General Assembly,
chaired by Prof. Joseph Stiglitz.
The
Global Crisis: The UN Could Make the Difference
C.P. Chandrasekhar
(March
30, 2009)
The UN Expert Commission on Finance, constituted by
the President of the UN General Assembly has submitted
its preliminary recommendations. This article argues
that the recommendations of the Commission are very
important and far reaching. Given the sweep and the
as yet unfathomed depth of the crisis even this menu
of policies may be just the beginning. But it possibly
is one set of recommendations that is most global
in perspective and adequately goes the distance needed
to make a difference when addressing the biggest crisis
capitalis has experienced since the 1930s.
The
G20 and the HIRCs
Oscar Ugarteche
(March
30, 2009)
The forthcoming G 20
meeting in London is an attempt of the seven Highly
Indebted Rich Countries (HIRCs) to safeguard their
interests in the wake of a changing world order. With
the financial crisis threatening to undermine their
stronghold on global economic activities, the issue
of protecting the flow of surpluses from creditor
developing economies to keep funding their deficits
is the prime objective of this session of the meeting.
Why
more of the same will not work
Jayati Ghosh
(March
24, 2009)
It is believed in Europe
that growing consumption in India and China will put
an unbearable strain on global resources and therefore
cannot really be supported. However, to raise the
standard of living of vast majority of the developing
world will require the developed world to consume
less of world's resources and reduce its contribution
to global warming absolutely. The current crisis is
an excellent opportunity to reorganise economic life
in the developed world to be less rapacious and more
sustainable. But sadly, this message is not being
heard at least among the major policy makers in the
core capitalist countries.
Fiscal
Stimulus Plans: The Need for a Global New Deal
Isabel Ortiz
(March
18, 2009)
This article reviews
the fiscal stimulus packages announced in 43 countries.
In March 2009, the total amount announced for these
stimulus plans is US$ 2.18 trillion, or 3.5% of world's
GDP, mostly in higher income economies. The majority
of these recovery packages contain measures to stimulate
firms, consumers, and public investment in infrastructure.
The author argues that a country approach is inadequate;a
global crisis requires global responses. Developing
countries will be hit hard; there is a need for increased
ODA to enable them to engage in countercyclical stimulation.
Stimulating global demand (and reducing poverty) will
require further redistributive measures. Responses
have been slow. There is an urgent need for a coordinated
expansionary global stimulus package.
Whatever's happened to Global Banking?
C.P. Chandrasekhar &
Jayati Ghosh (March 5, 2009)
The call for nationalization of banks in developed
countries, even if for a temporary period, marks a
potential ideological shift. Even staunch free market
advocates are declaring that nationalization is inevitable.
This article examines the factors explaining this
acceptance of public ownership and the implications
that this has for the future of banking regulation.
The Asian Face of the Global Recession
C.P. Chandrasekhar &
Jayati Ghosh (February
10, 2009)
As news of the intensity
of the global downturn worsens, so do assessments
of the extent of its global spread. This is distressing
since it implies that the argument that a "decoupled"
Asia could serve as a shock absorber that moderates
the impact of the crisis was wrong.
The
Wisdom of Storytellers
Jayati Ghosh
(February
3, 2009)
City
of high finance has been drowned by the crisis but
its dwellers remain oblivious to this reality.
Tools
for a New Economy
Robert
Pollin
(January 28, 2009)
In
this article, the author outlines the reasons for
the current financial crisis, juxtaposing them to
earlier such crises. He then argues that it is the
removal of the Glass-Steagall system in 1999 that
lies at the base of the current crisis. The author
also suggests a range of policy prescriptions for
regulating the financial sector to avert such calamities
in the future.
Just
Say "No" to the Credit Rating Agencies
Gerald
Epstein (January 19, 2009)
The
author looks into the dubious role played by credit
rating agencies; first in bringing in the financial
crisis and now attempting to hinder the recovery process.
The author questions the legitimacy of these agencies
and calls for ignoring them.
Redistribution
and Stability: Beyond the Keynesian / neo-liberal
impasse
Harry Shutt
(January 17, 2009)
Answer
to the current economic problems does not lie in a
return to Keynesian policies of yesteryear. Rather
a permanent solution lies in the fundamental shift
in the goal of economic policymaking from growth maximisation
to income distribution.
Will We never Learn?
(January
17, 2009)
As
financial crisis becomes increasingly global, world
economy seems headed for a deep and synchronised downturn.
The latest UNCTAD policy brief argues that in such
circumstances, traditional adjustment packages are
counterproductive and countercyclical policies are
needed to stimulate domestic demand in all countries.
UNCTAD
Policy Briefs
(January
17, 2009)
Recent
UNCTAD policy briefs discuss the reasons behind the
crisis and options before policymakers. They make
a case for stronger regulation of the financial system
and the need to avert deflation through government
intervention. The need for global co-operation and
regulation of trade and finance are also highlighted.
Progressive Program For Economic Recovery & Financial
Reconstruction
(January
7, 2009)
The
global economic crisis is rapidly worsening. Meanwhile
the incoming Obama administration is intensively developing
plans to ward off economic catastrophe. In this atmosphere
of hope laced with tremendous uncertainty, a group
of progressive economists met on November 21, 2008
at the New School for Social Research in New York
for a discussion, sponsored by the Political Economy
Research Institute (PERI) of the University of Massachusetts,
Amherst and the New School's Schwartz Center for Economic
Policy Analysis (SCEPA), with financial support from
the Ford Foundation. The goal of the meeting was to
discuss macroeconomic and financial policies for economic
revival that can solve the short-term crisis we face
and help put the economy on an environmentally sustainable
path of widely shared prosperity. From that meeting
evolved a detailed program presented here.
Principles For Economic Recovery & Financial Reconstruction
(January
7, 2009)
The global economic crisis
is rapidly worsening. Meanwhile the incoming Obama
administration is intensively developing plans to
ward off economic catastrophe. In this atmosphere
of hope laced with tremendous uncertainty, a group
of progressive economists met on November 21, 2008
at the New School for Social Research in New York
for a discussion, sponsored by the Political Economy
Research Institute (PERI) of the University of Massachusetts,
Amherst and the New School's Schwartz Center for Economic
Policy Analysis (SCEPA), with financial support from
the Ford Foundation. The goal of the meeting was to
discuss macroeconomic and financial policies for economic
revival that can solve the short-term crisis we face
and help put the economy on an environmentally sustainable
path of widely shared prosperity. From that meeting
evolved a statement of principles signed by many of
the participants.
The Crisis of the Capitalist World
Prabhat
Patnaik (January 1, 2009)
The current crisis of the
capitalist world is commonly explained as resulting
from "a lack of government regulation of the
financial sector", "insufficient supervision
allowing reckless lending by financial institutions",
"the unbridled greed of the financiers",
in short a series of mistakes and aberrations. This
entire line of reasoning however misses the point.
The crisis is not a "failure" of the system;
it is central to the mode of functioning of the system
itself. It is not the result of some "mistakes"
or "aberrations"; it is inherent to the
logic of the system.
The
Madoff Mystery
C. P. Chandrasekhar (January 1, 2009)
The Madoff scandal
is not only one more confirmation that the so-called
''model'' financial markets of the US are neither
transparent nor efficient, but also proof that so-called
savvy investors can be outright unintelligent. But,
even as everyone now admits that the regulatory system
has failed and markets do not work well, the desire
to design a regulatory structure that minimises failure
seems absent.
The
Coming Capitalist Consensus
Walden
Bello (December 27, 2008)
The
author argues that Global Social Democracy (GSD),
neoliberalism's most likely, successor, although critical
of neo-liberalism, shares among other things, neoliberalism's
bias for globalisation and preference for the market
as the principal mechanism for production, distribution,
and consumption. Like the old post-war Keynesian regime,
GSD is about social management. In contrast, the progressive
perspective is about social liberation. Therefore
there is an urgent need for critique challenging the
GSD perspective before this thinking becomes policy.
A
Recessionary Tide that won't Recede
C.P.
Chandrasekhar (December 27, 2008)
The
recently released data from various international
agencies show that the recession in the US economy
had begun as early as December 2007 and is spreading
across the globe. Temporary measures aimed at moderating
the downturn are in place, but there is much pessimism
about how long the recession would last.
Global
Recession: How Deep and for How Long?
C.P.
Chandrasekhar & Jayati Ghosh (December 18, 2008)
Global
attention has now shifted from concern over the dimensions
of the financial crisis to assessing how deep the
real economic recession it has triggered would be
and how long it would last. With the recession intensifying
and projections turning more pessimistic, there are
reasons to fear that a recovery expected in 2010 may
not materialize.
The Economy: Can Obama Fix It?
C.P. Chandrasekhar (November
18, 2008)
The victory of Barack Obama
in the US Presidential elections is a historic event.
However, Obama is inheriting a crisis-affected US
and world economy comparable to the Great Depression
of the 1930s. It will be an uphill task for Obama
to steer through this crisis.
Will the Paulson Bailout produce the basis for another
Minsky Moment?
Jan
Kregel (October 30, 2008)
The reorganisation of the
financial system that appears to be taking place in
the US does not seem to respect the basic principle
that any reformulation of the regulatory system should
limit the size and activities of financial institutions,
and should be dictated by the ability of supervisors,
regulators etc. to understand the institutions' operations.
Instead, it seems to support larger financial institutions
that are created by merging weak institutions with
stronger ones. If the present trend of bank mergers
continues, the resolution of the crisis, as Minsky
always predicted, will lay the basis for another financial
crisis.
The
Time has come: Let's Shut Down the Financial Casino
ATTAC's
Statement on the Financial Crisis and Democratic Alternatives
(October
29, 2008)
ATTAC
was launched in 1998 as an organization to counter
the onslaught of the profit driven financial markets
that was taking over the society at large. The following
is the official statement issued by the organization
on the current financial crisis.
The statement criticizes the regime of finance capital
for its own downfall and the subsequent hardships
it has brought upon the poorer section of the society.
The piece also suggests certain global level policy
prescriptions to correct the same.
We need a Paradigm Shift
Jayati
Ghosh (October 27, 2008)
The current financial
architecture has failed on the two obvious requirements
of preventing instability and crisis and transferring
resources from the richer to the poorer countries.
In addition, within national economies, it has encouraged
pro-cyclicality and bubbles and speculative fervour
rather than real productive investment, reduced the
crucial developmental role of directed credit and
so on. There is little doubt that greater state involvement
in economic activity is now both necessary as well
as desirable and the need of the hour is to make it
democratic and accountable.
The
Financial Crisis and the Developing World
Jayati Ghosh (October
25, 2008)
Violent fluctuations
in stock prices along with other factors witnessed
in emerging markets in the past two weeks have made
it clear that the developing world is not insulated
from the financial turmoil raging in industrial countries.
The crisis will have different impacts in different
places, depending on, in particular, the extent of
integration of the capital market of the concerned
developing country. An important positive fall-out
of this financial crisis is that it has created an
opportunity for replacing the economic model of neoliberalism
with more progressive and democratic alternatives.
Policy and Security Implications of the Financial
Crisis: A Plan for America
James K. Galbraith (October
24, 2008)
In mid-June 2008, an
international group of economists met in Paris to
discuss the gravity of the current economic crisis
and what the United States should do about it. The
meeting was convened by Economists for Peace and Security
and the Initiative for Rethinking the Economy. The
author presided over the off-the-record discussions,
summarized here on his own responsibility. In the
process, he provides one of the most comprehensive
and compelling assessments of where the United States
and the world now stand, and what can be done to ameliorate
the situation.
Structural
Causes of the Global Financial Crisis: A Critical
Assessment of the 'New Financial Architecture'
James Crotty (October
24, 2008)
The the author argues
that the ultimate cause of the current global financial
crisis is to be found in the deeply flawed institutions
and practices of what is often referred to as the
New Financial Architecture (NFA) – a globally integrated
system of giant bank conglomerates and the so-called
'shadow banking system' of investment banks, hedge
funds and bank-created Special Investment Vehicles.
The NFA has generated a series of ever-bigger financial
crises that have been met by larger and larger government
bailouts.
Proposals
for Effectively Regulating the U.S. Financial System
to Avoid Yet Another Meltdown
James Crotty & Gerald
Epstein (October 22, 2008)
The authors argue that the
current financial crisis is a result of the radical
financial deregulation process that began in the late
1970s. This evolution has taken the form of cycles
in which deregulation accompanied by rapid financial
innovation stimulates powerful financial booms that
end in crises. Governments respond to crises with
bailouts that allow new expansions to begin. As a
result, financial markets have become ever large and
financial crises have become more threatening to society,
which forces governments to enact ever larger bailouts.
In this paper the authors have analyzed a series of
structural flaws in the current financial system that
helped bring on the current crisis, and then proposed
a nine point regulation policy designed to end this
destructive dynamic.
Capitalism
in Transition?
C.P. Chandrasekhar (October
22, 2008)
The takeover of major private
banks by developed country governments is a desperate
attempt to stall the financial meltdown in these economies,
which resulted from the decision to allow private
financial players unfettered freedom to pursue profits
at the expense of all else. This threat has forced
governments to drop their neo-conservative bias against
State ownership.
In
Search of Causes
C.P. Chandrasekhar (October
22, 2008)
As the financial crisis in
the advanced economies intensifies, analyses of the
causes of the crisis and its sources have multiplied.
But, there is a degree of implicit agreement among
different analyses that the crisis can be traced to
forces unleashed by the transformation of US and global
finance starting in the 1970s.
Making
Financial Markets Work for Development
Peter Wahl (October 16, 2008)
This
paper analyses the financial sector crisis from the
development perspective. The author attempts look
a little closer at the interrelations between financial
markets and development, and to develop expertise
in order to engage in advocacy work and develop the
capacity to conduct campaigns. This does not mean
a shift away from the "core business" of
development, given that the influence of financial
markets on the South at least matches that of international
trade.
The
Crisis of the Liberal Financial Order, Analysis of
Rescuing and Reforming the International System
Michael Sakbani
(October 14, 2008)
This paper argues
that the current credit crisis marks the end of the
regime of deregulated finance. It proposes a new regulatory
system along the lines proposed by the Bank for International
Settlements. The hallmark of new regulatory system
will be its international uniformity to prevent financial
institutions from exploiting gaps in regulation and
its intensive coverage to include all financial institutions
including non-banks. The paper highlights the irrelevance
of IMF in solving the current credit crisis and argues
the need to reconsider the role and philosophy of
institutions like IMF and IBRD. It also analyses the
US treasury's rescue plan.
A
Perspective on the Crisis
Prabhat Patnaik (October
13, 2008)
After the demise of
the Keynesian policies, the world economy has been
dependent upon private expenditure for boosting aggregate
demand. The consequent boom causes deterioration in
the conditions of people in the third world, while
the crash also adversely affects them. The present
financial crisis also will have a similar impact on
the masses of the third world.
A
Simple Proposal to Resolve the Disruption of Counterparty
Risk in Short term Credit Markets
Jan Kregel (October10, 2008)
The current solution
offered for the credit crisis does not address the
heightened concern of investors regarding the credit
risk of their counterparties and the absolute liquidity
preference displayed by them. Investors' concern regarding
counterparty risk can be effectively quelled if the
Fed assumes the counterparty risk on both sides of
the transactions in the inter-bank market. Similarly,
to support bank lending to the non-financial sector,
the Fed could lend in full against such loans at the
Funds rate.
Socialising
Losses
C.P. Chandrasekhar (October
10, 2008)
There are reasons to believe
that the current package in the US bail out Bill will
fail to address the financial crisis adequately and
restore stability. Meanwhile, globally, markets are
in a state of collapse, partly driven by the expectations
generated by the scaremongering used to push through
the package.
Who
pays the Price for Financial Bailouts?
Jayati Ghosh (September
29, 2008)
The issue of moral hazard
cannot be looked at only in terms of faceless institutions
that are being rescued with taxpayers' money. But
it must also deal with the small number of individuals
who were enriched by the boom, who were able to manipulate
government policies to ensure the creation and prolongation
of what was always a speculative bubble that would
inevitably end.
A World of Inequality
Jayati Ghosh (September
27, 2008)
As economies slow down, people
in the developing world who did not gain from the
boom will face deteriorating conditions of living.
But now that there is overwhelming evidence of the
failure of the economic model on which the boom was
based, we can think afresh about how to organise economic
life, both nationally and globally.
The
End of the Illusion
Prabhat Patnaik (September
22, 2008)
The neo-liberal illusion of
the market being ''efficient'' is now over with the
threat of collapse of the US financial system and
the unprecedented upsurge in oil prices. Both have
been the outcome of speculation and the associated
underestimation of risks, which in turn have been
due to the lack of government intervention and the
globalization of finance. The form in which the system
will recover opens up new possibilities of praxis.
The Global Financial Crisis
Jayati Ghosh (September
20, 2008)
The bailout worked out by
the US government to save the financial system is
not a progressive nationalisation but the socialisation
of the risks of capitalists, and one that is to be
borne by taxpayers in the US and by developing countries.
The hugely expensive gamble, instead of helping the
US government buy its way out of the crisis, will
weaken its position as the dominant imperial power
in future.
No
End to the Global Meltdown
C.P. Chandrasekhar (September
15, 2008)
More than a year since the
sub prime crisis began, the financial meltdown still
persists. With the Lehman brothers filing for bankruptcy
and Merrill Lynch selling out recently, most major
investment banks seem to be facing a new set of problems.
These are related to the now-not-so-new sub-prime
crisis and the unwillingness of both the institutions
concerned and the regulators to properly assess the
effects of that crisis on their financial viability.
Old
Wine in a New Bottle: Subprime Mortgage Crisis-Causes
and Consequences
Michael Mah-Hui Lim (August 29,
2008)
This paper seeks to
explain the causes and consequences of the U.S. subprime
mortgage crisis, and how this crisis has led to a
generalized credit crunch in other financial sectors
that ultimately affects the real economy. It postulates
that, financial strategies based on market innovations
that have heightened, not reduced, systemic risks
and financial instability led to the crisis. In addition,
the underlying structural causes of the crisis are
located in the loose monetary policies of central
banks, deregulation, and excess liquidity in financial
markets that is a consequence of the kind of economic
growth that produces various imbalances.
The
Current Global Financial Turmoil and Asian Developing
Countries
Yilmaz Akyüz (June 3, 2008)
The resilience of emerging
markets to direct and indirect shocks from the current
financial crisis in the US will play an important
role in determining global growth and stability in
the near future, since much of it has been due to
expansion in these economies, notably in Asia. This
paper explores the extent to which growth and stability
in Asian emerging markets can be decoupled and this
the paper argues crucially depends on prevailing domestic
economic conditions as well as the policy response
to possible shocks from the crisis.
Are
We Heading for Global Stagflation?
Jayati Ghosh (April
8, 2008)
The combination of
stagnant or falling output and rising prices in the
US economy has raised fears of a stagflation not only
in the US but in the world economy as well. This article
argues that this prediction may well be true, though
not on the basis of the monetarist explanation but
rather depends ultimately on international political
economy and the relative strength of different groups
in the world economy.
The
Great Unravelling
Jayati Ghosh (April
7, 2008)
With the crisis in
the financial system in the US, the days of deregulated
finance seems to be over, not only in the US but globally.
Finance capital, which has so far systematically tried
to undermine the state and demanded autonomy for all
its actions, is now calling to that same state to
save finance from itself. But this cannot occur without
the state at least trying to reassert some control
over finance.
Minsky's
"Cushions of Safety", Systemic Risk and
the Crisis in the US Subprime Mortgage Market
Jan Kregel (March 20, 2008)
The sub prime crisis
in the US has little to do with the mortgage market,
or subprime mortgages per se, but rather with the
basic structure of the financial system that produces
overestimates of creditworthiness and underpricing
of risk. The bottom line is that the system has been
structured to make credit too cheap, leading to excessive
risk in order to provide higher returns. The financial
fragility that was identified in Minsky's work cannot
be eliminated, only damped by systemic policies. However,
it is possible to eliminate fragility that emerges
from the structure and regulation of the financial
system.
Leaning
on the State
C. P. Chandrasekhar (March 19,
2008)
Interestingly, the
very financial liberalisation that created the problems
epitomised by the sub-prime crisis was predicated
on a critique of the efficacy and correctness of intervention
by the state. But recent developments show that bail-outs
by the government of institutions that are weakened
by wrong financial decisions are now taken for granted,
thus legitimising interventionism. Can the "problem"
that liberalisation was directed to "solve",
now become the solution to the problems that liberalisation
creates?
Managing Financial Instability
in Emerging Markets: A Keynesian Perspective
Yilmaz Akyüz (February 29,
2008)
This paper examines
the extent to which Keynesian thinking could help
understand the causes and dynamics of crises in emerging
markets and provide suitable policy prescriptions.
It concludes that at the analytical level the endogenous
unstable dynamics analyzed by post Keynesians, notably
Hyman Minsky, goes a long way in providing a powerful
framework for explaining the boom-bust cycles driven
by international capital flows in emerging markets.
The paper also points out the need to develop new
instruments for stabilization, placing greater emphasis
on countercyclical financial regulations and control
than has hitherto been the case.
Global
Finance Today: Deja Vu?
C.P. Chandrasekhar (June
14, 2007)
This article describes and
analyses a set of new characteristics in the nature
of financial integration of developing countries with
their developed counterparts over the last four years.
It argues that this represents a transformation where
the risks associated with the current surge in capital
flows are far greater than World Bank predictions
and that a turn in the investment cycle, with far-reaching
implications, is real and imminent.
October 13, 2008. |