International financial system : policy and regulation /

About the Author p. xv
Preface p. xvii
Acknowledgements p. xix
Introduction p. xxi
Chapter 1 History of the Global Financial System p. 1
1.1 History p. 1
1.2 The Bretton Woods System p. 5
1.2.1 Pressures on the Bretton Woods System p. 7
1.2.2 Collapse of the Bretton Woods Exchange Rate System p. 9
1.2.3 The International Monetary Fund Today p. 11
1.2.4 The World Bank p. 13
1.2.5 The World Trade Organization p. 13
1.3 The System Today p. 14
Chapter 2 Globalization and Global Capital Flows p. 15
Chapter 3 The Latin American and African Debt Crisis of 1982 p. 21
3.1 The Debt Crisis of 1982 p. 21
3.2 The Loans of the 1970s: Their Origins and Destinations p. 23
3.2.1 The Lenders p. 24
3.2.2 The Borrowers p. 25
3.3 Causes of the Latin American and African Debt Crisis p. 25
3.3.1 Recycling of OPEC Funds p. 26
3.3.2 Bank Behaviour p. 27
3.3.2.1 Time and Ignorance of History p. 28
3.3.2.2 Inexperience of the Banks p. 29
3.3.2.3 Bank Profitability and Market Share p. 30
3.3.2.4 The Promotion of Bankers' Careers p. 31
3.3.2.5 Strong Debtor Economies p. 31
3.3.2.6 Syndicated Lending p. 32
3.3.2.7 Floating Interest Rates p. 32
3.3.2.8 The Position of US Banks at Home p. 32
3.3.3 Debtor Nation Policies p. 33
3.3.3.1 Large Budget Deficits p. 33
3.3.3.2 Overvalued Exchange Rates p. 33
3.3.3.3 Anti-export Trade Regimes p. 33
3.3.3.4 Capital Flight p. 34
3.3.3.5 Corruption p. 34
3.3.4 External Factors p. 35
3.3.4.1 Interest Rate Increases p. 35
3.3.4.2 Adverse Exchange Rate Movements p. 35
3.3.4.3 Falls in Commodity Prices p. 36
3.3.4.4 The Worldwide Recession p. 36
3.3.4.5 Cessation of Petrodollar Recycling p. 36
3.3.4.6 Conclusion on External Factors p. 36
Chapter 4 The Brady Plan p. 39
4.1 Background to the Brady Plan p. 39
4.2 The Baker Plan p. 40
4.3 The Brady Plan p. 40
4.3.1 Mexico's Brady Restructuring p. 41
4.3.2 The Phillipines Brady Restructuring p. 47
4.3.3 Venezuela's Brady Restructuring p. 48
4.3.4 Uruguay's and Chile's Restructurings p. 50
4.3.5 Brazil's Brady Restructuring Initiated p. 50
4.3.6 Argentina's Brady Restructuring p. 50
4.3.7 Brazil's Brady Restructuring is Completed p. 51
4.3.8 Collateralizing Brady Bonds p. 52
4.3.9 Conclusions Regarding the Brady Plan p. 53
Chapter 5 The Asian Economic Crisis of 1997 p. 55
5.1 The Crisis Erupts p. 55
5.2 Causes of the Asian Economic Crisis p. 56
5.2.1 Type of Indebtedness p. 57
5.2.2 Extent of Indebtedness p. 57
5.2.2.1 Excess Liquidity in the Developed World p. 58
5.2.2.2 The Central Role of Crossover Investors p. 59
5.2.3 Financial Sector Weaknesses p. 60
5.2.3.1 Failure to Intermediate Capital Flows Effectively p. 60
5.2.3.2 The Premature Liberalization of Local Financial Markets p. 61
5.2.4 Fixed Exchange Rates p. 61
5.2.5 Region-Wide Loss of Confidence p. 62
5.3 Conclusion and Lessons p. 63
5.3.1 The Benefits of Floating Exchange Rates p. 64
5.3.2 The High Risks of Foreign Currency Borrowing p. 64
5.3.3 The Need for Long-Term Local Currency Capital p. 65
5.3.4 International Capital Flows as a Product of Developed World Liquidity p. 65
5.3.5 The Urgent Need for a New Perspective on Responsibility in International Lending and Investment p. 65
5.4 The Role and Impact of the IMF in the Asian Crisis p. 66
5.4.1 Misdiagnosis p. 67
5.4.2 Excessive Conditionality p. 68
5.4.3 Protection of the System and of Creditors p. 69
5.4.4 Mishandling of Market Expectations p. 70
5.4.5 Social Costs of IMF Policies p. 70
5.5 Conclusions on the IMF's Role in the Asian Crisis p. 71
Chapter 6 Let's all Cry for Argentina p. 75
6.1 The Argentine Experience p. 75
6.2 Causes of the Argentine Crisis p. 77
6.2.1 The Peso-Dollar Peg p. 77
6.2.2 Excessive Indebtedness p. 78
6.2.3 Corruption p. 79
6.2.4 IMF Policies p. 80
6.3 The Restructuring of Argentina's Indebtedness p. 81
Chapter 7 Debt Relief for Poor Countries and for Iraq p. 85
7.1 Debt Relief p. 85
7.2 The US Approach to Iraqi Debt p. 86
7.3 Debt-for-Development Exchanges p. 93
Chapter 8 Measures Available to Debtor Nations p. 97
8.1 Rigorous Local Prudential Regulation p. 97
8.2 Debt Policy p. 99
8.2.1 Borrow Less Foreign Currency Debt p. 99
8.2.2 Issue Less Short-Term Debt p. 100
8.2.3 Issue More Long-Term Local Currency Denominated Debt p. 100
8.3 Exchange Rate Policies p. 101
8.4 Capital Controls p. 104
8.4.1 Chile's Controls p. 107
8.4.2 Malaysia's Controls p. 108
8.4.3 The Uses of Inflow Controls p. 109
8.4.4 The Uses of Outflow Controls p. 110
8.4.5 Inflow and Outflow Controls Compared p. 111
8.4.6 Inflow Controls in Developed Countries p. 111
8.4.7 Conclusion on Capital Controls p. 112
8.5 Be More Willing to Play the Default Card p. 112
Chapter 9 Global Measures to Improve the System p. 121
9.1 The National Balance Sheet Problem p. 121
9.1.1 The Volatility Machine p. 122
9.1.2 Original Sin p. 123
9.1.3 Currency Mismatches p. 124
9.1.4 Local Currency Bond Markets p. 125
9.1.5 An International Solution p. 127
9.1.5.1 Changing the Lending Policies of Multilateral Development Banks p. 129
9.1.5.2 Local Currency Solutions p. 130
9.1.5.3 Re-orienting the Paris Club p. 130
9.1.6 Conclusion on National Balance Sheet Structures p. 131
9.2 A Tax on International Currency Transactions p. 132
9.3 A Global Financial Regulator p. 135
9.4 A Lender of Last Resort p. 135
9.5 A Sovereign Bankruptcy Regime p. 137
9.5.1 The Benefits of Bankruptcy Regimes p. 138
9.5.2 Why Is There No Global Sovereign Bankruptcy Regime? p. 139
9.5.2.1 Absence of an Overarching Need - until Relatively Recently - for a Sovereign Bankruptcy Regime p. 140
9.5.2.2 Difficulties of Creating International Institutions p. 140
9.5.2.3 Perceived Interests of Creditors p. 141
9.5.3 The Details of a Global Sovereign Bankruptcy Regime p. 142
9.6 Collective Action Clauses p. 143
9.7 The IMF Proposal: The SDRM p. 145
9.7.1 Would the SDRM Have Served the Debtors? p. 148
9.8 Benefits of a Global Sovereign Bankruptcy Regime p. 151
9.9.1 Conclusion on Systemic Measures p. 152
Chapter 10 The Way Forward p. 155
10.1 The Socialization of Private Sector Debt p. 156
10.2 The Future of the IMF p. 158
10.2.1 The IMF and Poverty in Africa p. 165
10.2.2 The Fund's Inability to Reinvent Itself p. 166
List of References p. 171
Index p. 191