1st Edition

Emerging Economies and the Global Financial System Post-Keynesian Analysis

    290 Pages 16 B/W Illustrations
    by Routledge

    290 Pages 16 B/W Illustrations
    by Routledge

    This book provides a comprehensive overview of the financial integration of emerging economies through an in-depth analysis of the international monetary system, how it impacts capital flows and exchange rates, and its implications for policy making.

    The financial integration of emerging economies has been a remarkable development of the past two decades. The growth of cross-border transactions and asset ownership, not least through the accumulation of foreign exchange reserves, has put many of these countries in a more prominent, if still peripheral, position within the global financial system. This has not been a smooth process, as integration has been marked by cyclical waves of capital flows, with financial and currency instability often accompanying the acute phases of these cycles. While conventional economic theory traditionally sees financial integration as a positive development, Post-Keynesian economists, working in the tradition of Keynes, Minsky and Kalecki, have long taken a more sceptical viewpoint. By centring the analysis of financial dynamics on concepts as liquidity, uncertainty, balance-sheet structures and institutions, Post-Keynesian theory highlights the intrinsic character of shocks imposed by financial integration upon emerging economies, and their implications for economic growth and distribution. This book demonstrates that these analyses can be fruitfully used to gain a better understanding of financial (in)stability and economic development in emerging economies as they integrate into the global financial system.

    This work provides key reading for students and scholars of economics, political economy and finance that are interested in the financial integration of emerging economies, and how the heterodox tradition of Post-Keynesian economics contributes to its analysis.

    Part I. Introduction and Background

    1. Introduction

    Bruno Bonizzi, Annina Kaltenbrunner and Raquel A. Ramos

    2. Two Post-Keynesian approaches to international finance: the compensation thesis and the cambist view

    Marc Lavoie

    3. Trade versus capital flows: the key implicit and methodological differences between the neoclassical and the Post Keynesian approaches to exchange rate determination

    John T. Harvey

    PART II. Minsky, balance sheets and cycles

    4. A Minskyan framework for the analysis of financial flows to emerging economies

    Bruno Bonizzi and Annina Kaltenbrunner

    5. Post Keynesian and structuralist approaches to boom-bust cycles in emerging economies

    Karsten Kohler

    6. Cost competitiveness and asset prices as determinants of the current account in emerging economies

    Alexander Guschanski and Engelbert Stockhammer

    7. Space in Post Keynesian monetary economics: an exploration of the literature

    Gary Dymski and Annina Kaltenbrunner

    PART III. Currency Hierarchy

    8. Evolving international monetary and financial architecture and the development challenge: a liquidity preference theoretical perspective

    Jörg Bibow

    9. International money, privileges and underdevelopment

    Hansjörg Herr and Zeynep Nettekoven

    10. The Post Keynesian View on Exchange Rates: towards the consolidation of the different contributions in the ABM and SFC frameworks

    Raquel A. Ramos and Daniela Magalhães Prates

    11. A Post Keynesian framework for real exchange rate determination: an overview

    Lúcio Barbosa, Frederico G. Jayme Jr. and Fabrício J. Missio

    Part IV. Current Account and Growth

    12. The Kaleckian theory of exchange rates

    Jan Toporowski

    13. Financial liberalisation, exchange rate dynamics and the financial Dutch disease in developing and emerging economies

    Alberto Botta

    14. Global financial flows in Kaleckian models of growth and distribution: a survey

    Pablo G. Bortz

    Part V. Policy Implications

    15. Implications of Modern Money Theory on Development Finance

    Yan Liang

    16. Monetary sovereignty in the Post Keynesian perspective: in the search of a concept

    Daniela Magalhães Prates

    17. Dealing with global financial asymmetry: Contributions of Regional Monetary Cooperation Between Emerging Markets and Developing Countries

    Laurissa Mühlich and Barbara Fritz

    18. De-regulation of Finance in China and India: a Post Keynesian Analysis

    Sunanda Sen


    Bruno Bonizzi is a Senior Lecturer in Finance at the University of Hertfordshire, Business School, UK.

    Annina Kaltenbrunner is Associate Professor in the Economics of Globalisation and the International Economy at Leeds University Business School, UK.

    Raquel A. Ramos is a Research Associate at the Centre d’Économie de l’Université Paris Nord, France.

    "Although several theoretical and empirical Post-Keynesian contributions usually recognize the relevance of real factors in the context of small open economies, this book points out in a complementary and virtuously way the importance of financial factors and their relevance for policymakers in the case of trade and financially integrated EMEs. In this vein, the book provides a crystal clear insight into some relevant Post-Keynesian contributions that show the importance of financial integration as a key conceptual device to understand the challenges that EMEs’ governments face in terms of the financial deregulation tendencies experimented through the last decades, the resulting mounting financial instability and its relation to volatile capital gross flows, their negative impact on exchange rates, the notion of monetary sovereignty, and the need of adopting macroprudential policies to control the negative effects of greater financial instability and contribute to exchange rate stability."

    Fernando Toledo

    Review of Political Economy