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Barry Eichengreen - One of the best experts on this subject based on the ideXlab platform.
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capital account liberalization and growth was mr mahathir right
International Journal of Finance & Economics, 2003Co-Authors: Barry Eichengreen, David LeblangAbstract:Much ink has been spilled over the connections between capital account liberalization and growth. One reason that previous studies have been inconclusive, we show, is their failure to account for the impact of crises on growth and for the capacity of controls to limit those disruptive output effects. Accounting for these influences, it appears that controls influence macroeconomic performance through two channels, directly (what we think of as their positive impact on resource allocation and efficiency) and indirectly (by limiting the disruptive effects of crises at home and abroad). Because these influences work in opposite directions, it is not surprising that previous studies, in failing to distinguish between them, have been unable to agree whether the effect of controls tilts one way or the other. And because vulnerability to crises varies across countries and with the structure and performance of the International Financial System, it is not surprising that the effects of capital account liberalization on growth are contingent and context specific. We document these patterns using two entirely different data sets: a panel of historical data for 21 countries covering the period 1880–1997, and a wider panel for the post-1971 period like that employed in other recent studies. Copyright # 2003 John Wiley & Sons, Ltd. JEL CODE: F0; F3
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is aggregation a problem for sovereign debt restructuring
The American Economic Review, 2003Co-Authors: Barry Eichengreen, Ashoka ModyAbstract:Reform of the mechanisms and procedures through which problems of sovereign debt sustainability are resolved is at the centre of the effort to make the International Financial System less crisis prone. The purported difficulty of coordinating creditors holding distinct bond issues provides one basis for choosing among the reform proposals currently on the table. We assess the significance of this difficulty (‘the aggregation problem’) using evidence on the pricing of International bonds. Our evidence suggests that investors do perceive that aggregation has costs. Plausibly, they worry most about difficulties of information sharing and coordination across issues when the debt in question is an obligation of a country with a significant perceived probability of having to restructure.
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capital account liberalization and growth was mr mahathir right
National Bureau of Economic Research, 2003Co-Authors: Barry Eichengreen, David LeblangAbstract:Much ink has been spilled over the connections between capital account liberalization and growth. One reason that previous studies have been inconclusive, we show, is their failure to account for the impact of crises on growth and for the capacity of controls to limit those disruptive output effects. Accounting for these influences, it appears that controls influence macroeconomic performance through two channels, directly (what we think of as their positive impact on resource allocation and efficiency) and indirectly (by limiting the disruptive effects of crises at home and abroad). Because these influences work in opposite directions, it is not surprising that previous studies, in failing to distinguish between them, have been unable to agree whether the effect of controls tilts one way or the other. And because vulnerability to crises varies across countries and with the structure and performance of the International Financial System, it is not surprising that the effects of capital account liberalization on growth are contingent and context specific. We document these patterns using two entirely different data sets: a panel of historical data for 21 countries covering the period 1880-1997, and a wider panel for the post-1971 period like that employed in other recent studies.
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globalizing capital a history of the International monetary System
1998Co-Authors: Barry EichengreenAbstract:The importance of the International Monetary System is evident in the daily news stories about fluctuating currencies and in dramatic events, such as the recent reversals in the Mexican economy. It has become increasingly apparent that one cannot understand the International economy without knowing how its monetary System operates. This volume tells the story of the International Financial System over the past 150 years. It is intended not only for economists, but also for a general audience of historians, political scientists, professionals in government and business, and anyone with a broad interest in International economic and political relations. The book demonstrates that insights into the International Monetary System and effective principles for governing it can result only if is seen as a historical phenomenon extending from the gold standard period to interwar instability, then to Bretton Woods and, finally, to the post-1973 period of fluctuating currencies. Eichengreen analyzes the shift from pegged to floating exchange rates in the 1970s, and ascribes that change to the growing capital mobility that has made pegged rates difficult to maintain. However, he shows that capital mobility was also high prior to World War I, yet this did not prevent the maintenance of fixed exchange rates. What was critical for the successful maintenance of fixed exchange rates during that period was the fact that governments were relatively insulated from democratic politics and, thus, from pressure to trade off exchange rate stability for other goals, such as the reduction of unemployment. Today, pegging exchange rates would require very radical reforms of a sort that governments are understandably reluctant to embrace. The implication seems undeniable: floating rates are here to stay. Barry Eichengreen is the author of "Golder Fetters: The Gold Standard and the Great Depression, 1918-1939".
Helene Rey - One of the best experts on this subject based on the ideXlab platform.
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dilemma not trilemma the global Financial cycle and monetary policy independence
Social Science Research Network, 2015Co-Authors: Helene ReyAbstract:There is a global Financial cycle in capital flows, asset prices and in credit growth. This cycle co‐moves with the VIX, a measure of uncertainty and risk aversion of the markets. Asset markets in countries with more credit inflows are more sensitive to the global cycle. The global Financial cycle is not aligned with countries’ specific macroeconomic conditions. Symp toms can go from benign to large asset price bubbles and excess credit creation, which are among the best predictors of Financial crises. A VAR analysis suggests that one of the determinants of the global Financial cycle is monetary policy in the centre country , which affects leverage of global banks, capital flows and credit growth in the International Financial System. Whenever capital is freely mobile, the global Financial cycle constrains national monetary policies regardless of the exchange rate regime. For the past few decades, International macroeconomics has postulated the “trilemma”: with free capital mobility, inde pendent monetary policies are feasible if and only if exchange rates are floating. The global Financial cycle transforms the trilemma into a “dilemma” or an “irreconcilable duo”: independent monetary policies are possible if and only if the capital account is managed. So should policy restrict capital mobility? Gains to International capital flows have proved elusive whether in calibrated models or in the data. Large gross flows disrupt asset markets and Financial intermediation, so the costs may be very large. To deal with the global Financial cycle and the “dilemma”, we have the following policy options: ( a) targeted capital controls; (b) acting on one of the sources of the Financial cyc le itself, the monetary policy of the Fed and other main central banks; (c) acting on the transmission channel cyclically by limiting credit growth and leverage during the upturn of the cycle, using national macroprudential policies; (d) acting on the transmission channel structurally by imposing stricter limit s on leverage for all Financial intermediaries. We argue for a convex combination of (a), (c) and (d).
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dilemma not trilemma the global Financial cycle and monetary policy independence
Research Papers in Economics, 2015Co-Authors: Helene ReyAbstract:There is a global Financial cycle in capital flows, asset prices and in credit growth. This cycle co-moves with the VIX, a measure of uncertainty and risk aversion of the markets. Asset markets in countries with more credit inflows are more sensitive to the global cycle. The global Financial cycle is not aligned with countries’ specific macroeconomic conditions. Symptoms can go from benign to large asset price bubbles and excess credit creation, which are among the best predictors of Financial crises. A VAR analysis suggests that one of the determinants of the global Financial cycle is monetary policy in the centre country, which affects leverage of global banks, capital flows and credit growth in the International Financial System. Whenever capital is freely mobile, the global Financial cycle constrains national monetary policies regardless of the exchange rate regime.
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dilemma not trilemma the global Financial cycle and monetary policy independence
National Bureau of Economic Research, 2015Co-Authors: Helene ReyAbstract:There is a global Financial cycle in capital flows, asset prices and in credit growth. This cycle co‐moves with the VIX, a measure of uncertainty and risk aversion of the markets. Asset markets in countries with more credit inflows are more sensitive to the global cycle. The global Financial cycle is not aligned with countries’ specific macroeconomic conditions. Symptoms can go from benign to large asset price bubbles and excess credit creation, which are among the best predictors of Financial crises. A VAR analysis suggests that one of the determinants of the global Financial cycle is monetary policy in the centre country, which affects leverage of global banks, capital flows and credit growth in the International Financial System. Whenever capital is freely mobile, the global Financial cycle constrains national monetary policies regardless of the exchange rate regime. For the past few decades, International macroeconomics has postulated the “trilemma”: with free capital mobility, independent monetary policies are feasible if and only if exchange rates are floating. The global Financial cycle transforms the trilemma into a “dilemma” or an “irreconcilable duo”: independent monetary policies are possible if and only if the capital account is managed. So should policy restrict capital mobility? Gains to International capital flows have proved elusive whether in calibrated models or in the data. Large gross flows disrupt asset markets and Financial intermediation, so the costs may be very large. To deal with the global Financial cycle and the “dilemma”, we have the following policy options: ( a) targeted capital controls; (b) acting on one of the sources of the Financial cycle itself, the monetary policy of the Fed and other main central banks; (c) acting on the transmission channel cyclically by limiting credit growth and leverage during the upturn of the cycle, using national macroprudential policies; (d) acting on the transmission channel structurally by imposing stricter limits on leverage for all Financial intermediaries.
Ross P. Buckley - One of the best experts on this subject based on the ideXlab platform.
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china s negotiation of the International economic legal order
Social Science Research Network, 2015Co-Authors: Ross P. Buckley, Weihuan ZhouAbstract:This article explores China's use of the International trade System, International investment System and International Financial System to promote its domestic economic and sectoral reforms, with a view to analyzing the new directions and changing paradigms associated with China’s growing relationship with these aspects of the International economic order.
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poverty and the International economic legal System the direct contribution of the International Financial System to global poverty
Social Science Research Network, 2013Co-Authors: Ross P. BuckleyAbstract:The International Financial System has made a major, direct and sustained contribution to global poverty for the past 30 years. It has worsened it. It has done so in two main ways. First, the analytical framework and perspective the International Monetary Fund has brought to its role in developing countries has served to promote and entrench poverty. Secondly, the socialisation of private sector debt which the IMF has orchestrated or been complicit in has directly contributed to poverty in many countries.
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from crisis to crisis the global Financial System and regulatory failure
2011Co-Authors: Ross P. Buckley, Douglas W ArnerAbstract:The global Financial System - founded on principles of capital account liberalization, the process by which barriers to capital flows between nations are eliminated and Financial globalization facilitated - has proven highly crisis-prone and deficient for debtors and creditors alike. Since 2008 we have been learning once again that mistakes in global finance can bring rich countries to the brink of bankruptcy and appalling suffering to the poorest citizens of poor countries. The predictable response measures of institutional economists fail to stop the continuing sacrifice of the lives of thousands and the futures of millions. This book presents a powerful indictment of this regulatory failure and calls for greatly increased attention to International Financial law and a new recognition of the principles that ought to underlie it. Using a historical approach that compares the various Financial crises of the twentieth century, the authors clearly show how in each case the same misconceived economic policy responses paved the way for the next 'crash'. Among the numerous topics that arise in the course of this revealing analysis are the following: bank profitability and market share; floating interest rates; overvalued exchange rates; excess liquidity; premature liberalization of local Financial markets; OTC derivatives markets; accounting standards; credit ratings and credit rating agencies; investor protection arrangements; insurance companies; payment, clearing and settlement activities; capital controls; and debt-for-development exchanges. The author offers detailed commentary on: the role of multilateral development banks, the IMF, and the WTO in crisis response; measures stemming from the Basel Accords, the Brady Plan, and other response initiatives; and proposals by the European Commission, the G20, and other groups, including Financial transaction tax schemes and a global sovereign bankruptcy regime. Apart from its great usefulness as a detailed introduction to the International Financial System and its regulation, the book is enormously valuable for its clear identification of the specific 'danger zones' in economic policy that prevent regulators from intercepting the vicious cycle of Financial crisis. Banking and investment policymakers at every level (not to mention bankers and investors themselves) cannot afford to neglect this book.
Steven L. Schwarcz - One of the best experts on this subject based on the ideXlab platform.
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A Model-law Approach to Sovereign Debt Restructuring
2017Co-Authors: Steven L. SchwarczAbstract:Unresolved sovereign debt problems and disruptive litigation are hurting debtor nations and their citizens, as well as their creditors. A default can also pose a serious Systemic threat to the International Financial System. Yet the existing “contractual” approach to sovereign debt restructuring, including the use of so-called collective action clauses, is insufficient to solve the holdout problem; recent empirical research indeed shows a drastic rise in sovereign debt litigation by holdout creditors. And the political economy of treaty-making makes a multilateral “statutory” approach highly unlikely to succeed in the near future. This article, prepared at the invitation of the United Nations Commission on International Trade Law (UNCITRAL) for presentation at its 50th Anniversary Congress, shows why a model-law approach to sovereign debt restructuring should be realistic and effective. Nations and even subnational jurisdictions could individually enact a model law as their internal law, and contracts governed by that law would thereby become governed by the model law. Choice of law thus gives a model-law approach a powerful multiplier effect. A model-law approach could also solve the problem of pari passu clauses and address the critical need for a Financially troubled nation to obtain liquidity during its restructuring process. The article proposes a form of Sovereign Debt Restructuring Model Law, which has been vetted in discussions with leading experts worldwide and also embraces the Basic Principles on Sovereign Debt Restructuring Processes adopted by the United Nations General Assembly in 2015. At the very least, pursuing the Model Law in parallel to other approaches would help to develop norms for a sovereign debt restructuring legal framework that goes beyond mere contracting.
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Sovereign Debt Restructuring and English Governing Law
The Brooklyn Journal of Corporate Financial and Commercial Law, 2017Co-Authors: Steven L. SchwarczAbstract:Whether or not their fault, nations sometimes borrow at levels that become unsustainable. Until resolved, the resulting debt burden hurts not only those nations but also their citizens, their creditors, and — by posing serious Systemic risks to the International Financial System — the wider economic community. The existing contractual framework for restructuring sovereign debt is inadequate, often leaving little alternative between a bailout, which is costly and creates moral hazard, and a default, which raises the specter of Financial contagion and chaos. Although global organizations, including the United Nations and the International Monetary Fund, have tried to strengthen the sovereign-debt-restructuring framework through treaties, such a multilateral legal approach is highly unlikely to succeed in the near future. This essay argues that a model-law approach should facilitate sovereign debt restructuring much more feasibly than a multilateral approach. Model laws have long been used in cross-border lawmaking, when treaties fail. Unlike a treaty, a model law does not require widespread acceptance for its implementation. In particular, if this essay’s model law were enacted into English law, that alone would enable the fair and consensual restructuring of the immense stock — perhaps a quarter to a third or more of all sovereign debt contracts — of such contracts governed by that law. And because it would achieve, by operation of law, the equivalent of the ideal goal of including aggregate-voting collective action clauses in all sovereign debt contracts, such enactment should ensure the continuing legitimacy and attractiveness of English law as the governing law for future sovereign debt contracts. At the very least, however, this essay should serve to increase a model-law approach’s political feasibility by explaining the approach and its potential benefits and limitations. An incremental approach to developing norms, such as one developed through a model law, has strong precedent in the legal ordering of International relationships.
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A Model Law Approach to Restructuring Unsustainable Sovereign Debt
2015Co-Authors: Steven L. SchwarczAbstract:Unresolved sovereign debt problems are hurting debtor nations, their citizens and their creditors, and also can pose serious Systemic threats to the International Financial System. The existing contractual restructuring approach is insufficient to make sovereign debt sustainable. Although a more Systematic legal resolution framework is needed, a formal multilateral approach, such as a treaty, is not currently politically viable. An informal model-law approach should be legally, politically and economically feasible. This informal approach would not require multilateral acceptance. Because most sovereign debt contracts are governed by either New York or English law, it would be sufficient if one or both of those jurisdictions enacted a proposed Sovereign Debt Restructuring Model Law as their domestic law.
Ashoka Mody - One of the best experts on this subject based on the ideXlab platform.
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is aggregation a problem for sovereign debt restructuring
The American Economic Review, 2003Co-Authors: Barry Eichengreen, Ashoka ModyAbstract:Reform of the mechanisms and procedures through which problems of sovereign debt sustainability are resolved is at the centre of the effort to make the International Financial System less crisis prone. The purported difficulty of coordinating creditors holding distinct bond issues provides one basis for choosing among the reform proposals currently on the table. We assess the significance of this difficulty (‘the aggregation problem’) using evidence on the pricing of International bonds. Our evidence suggests that investors do perceive that aggregation has costs. Plausibly, they worry most about difficulties of information sharing and coordination across issues when the debt in question is an obligation of a country with a significant perceived probability of having to restructure.