Recurrent crises in emerging markets and in advanced economies in the last decades cast doubt about the ability of financial liberalization to meet the aims of sustainable economic growth and development. The increasing importance of financial markets and financial efficiency criterion over economic decisions and policies since the 1980s laid down the conditions of the development process of emerging market economies. Numerous crises experienced thereafter gave rise to flourishing work on the links between financialization and economic development. Several decades of observations and lessons can now be integrated into economic and econometric models to give more sophisticated and multivariable approaches to financial development with respect to growth and development issues. In the markets-based and private-enterprise dominated world economy, two conditions for a successful growth-enhancing financial evolution can at least be brought fore: macroeconomic stability and consistent supervision.
But even after the 2007-2008 global crisis, economists do not agree on the meaning of those conditions. For liberal and equilibrium-market economists, good finance and supervision mean market-friendly structures while for institutionalists, post-Keynesian and Marxist economists, good finance and supervision must lie in collectively designed and managed public structures. Drawing heavily on the tumultuous crises of the 1990s-2000s, this book argues that those experiences can shed light on such a crucial issue and lead economic theory and policy to go beyond the blindness of efficient free markets doctrine to economic catastrophes. It also points to new challenges to global stability in the wake of reconfiguration of international financial arena under the weight of major emerging market economies.
James K. Galbraith
Introduction: Financial Development: The Sword Of Damocles Hanging Over The Process Of Economic Development
Chapter 1. Financial Liberalization, Crises And Policy Implications
Chapter 2. Global Financing: A Bad Medicine For Developing Countries
Chapter 3. Financial Development, Instability And Some Confused Equations
Chapter 4. Underdeveloped Financial Markets Infrastructure Of Emerging Market Economies. Assessment Of Underlying Challenges And Suggested Policy Responses
Chapter 5. Towards De-Financialization
Chapter 6. A Common Currency For The Common Good
Chapter 7. A Capital Market Without Banks. Lending And Borrowing In Hennaarderadeel, Friesland, 1537–1555
Merijn KNIBBE And Paul Borghaerts
Chapter 8. Financial Liberalization, Financial Development And Instability In Emerging Economies: What Lessons For The Franc Zone?
Aboubakar Sidiki Cisse
Chapter 9. Depositor Myopia And Banking Sector Behavior
Ozan Bakis, Fatih Karanfil And Sezgin Polat
Chapter 10. Dollarization And Financial Development: The Experience Of LA Countries
Eugenia Correa And Alicia Girón
Chapter 11. Financialization In Brazil: A Paper Tiger, With Atomic Teeth?
Chapter 12. National And Supra-National Financial Regulatory Architecture: Transformations Of The Russian Financial System In The Post-Soviet Period
Nadezhda N. Pokrovskaia
Chapter 13: Minsky In Beijing: Shadow Banking, Credit Expansion And Debt Accumulation In China
The 2007-8 Banking Crash has induced a major and wide-ranging discussion on the subject of financial (in)stability and a need to revaluate theory and policy. The response of policy-makers to the crisis has been to refocus fiscal and monetary policy on financial stabilisation and reconstruction. However, this has been done with only vague ideas of bank recapitalisation and ‘Keynesian’ reflation aroused by the exigencies of the crisis, rather than the application of any systematic theory or theories of financial instability.
Routledge Critical Studies in Finance and Stability, edited by Jan Toporowski from SOAS, University of London covers a range of issues in the area of finance including instability, systemic failure, financial macroeconomics in the vein of Hyman P. Minsky, Ben Bernanke and Mark Gertler, central bank operations, financial regulation, developing countries and financial crises, new portfolio theory and New International Monetary and Financial Architecture.