Description
Book SynopsisOnce 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 have shattered the consensus. In this remarkably clear and pithy volume, o
Trade ReviewJean Tirole, Winner of the 2014 Nobel Prize in Economics "An insightful contribution to the expanding economics research that reexamines the role of the International Monetary Fund in emerging markets and financial crises."--Choice
Table of ContentsAcknowledgments vii Introduction ix 1. Emerging Markets Crises and Policy Responses 1 The pre-crisis period 1 The crisis 7 IMF reforms, regulatory changes, and private sector innovations 18 2. The Economists' Views 23 Consensus view 23 Conflicting advice and the topsy-turvy principle 29 "Unrealistic" encroachments on sovereignty 36 Theories 36 3. Outline of the Argument and Main Message 47 The problem of a standard borrower 48 Why is external borrowing different? 48 Institutional and policy responses to market failure 50 4. Liquidity and Risk-Management in a Closed Economy 53 Corporate financing: key organizing principles 53 Domestic liquidity provision 70 5. Identification of Market Failure: Are Debtor Countries Ordinary Borrowers? 77 The analogy and a few potential differences 77 A dual-agency perspective 81 The government's incentives 86 Discussion 88 A common-agency perspective 92 6. Implications of the Dual- and Common-Agency Perspectives 97 Implication 1: the representation hypothesis 97 Implication 2: policy analysis 102 Cross-country comparisons 108 Is there a need for an international lender of last resort? 110 7. Institutional Implications: What Role for the IMF? 113 From market failure to mission design 113 Governance 116 8. Conclusion 129 References 131 Index 145
