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 | Financial Crises, Liquidity, and the International Monetary System |
Once 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--from Latin America in the early 1980s to Scandinavia a decade later to Mexico, Southeast Asia, Russia, and, quite lately, Argentina--have shattered the consensus. In this remarkably clear and pithy volume, one of Europe's leading economists examines these crises, the reforms being undertaken to prevent them, and how global financial institutions might be restructured to this end. Jean Tirole first analyzes the current views on the crises and on the reform of the international financial architecture. Reform proposals often treat the symptoms rather than the fundamentals, he argues, and sometimes fail to reconcile the objectives of setting effective financing conditions while ensuring that a country "owns" its reform program. A proper identification of market failures is essential to reformulating the mission of an institution such as the IMF, he emphasizes. Next he adapts the basic principles of corporate governance, liquidity provision, and risk management of corporations to the particulars of country borrowing. Building on a "dual- and common-agency perspective," he revisits commonly advocated policies and considers how multilateral organizations can help debtor countries reap enhanced benefits while liberalizing their capital accounts. Based on the Paolo Baffi Lecture the author delivered at the Bank of Italy, this refreshingly accessible book is teeming with rich insights that researchers, policymakers, and students at all levels will find indispensable. "An insightful contribution to the expanding economics research that reexamines the role of the International Monetary Fund in emerging markets and financial crises."--Choice Endorsements: "In this remarkably ambitious and insightful book, Jean Tirole tackles the core issues in the economics of international lending with his usual superb clarity of thought. This book is essential reading to anyone interested in understanding the economics behind the recent drive to improve the international financial architecture."--Ken Rogoff, Chief Economist and Director of Research, International Monetary Fund "Jean Tirole is living proof of the value of good economic thinking. He shines new light on, and dissipates heat from, every issue he touches. In this book he offers us an amazing combination of detailed facts and rigorous theory about international financial crises. His perspective of dual and common agencies enriches our understanding of the roles and shortcomings of international economic institutions, and points the way to reform. All the supposed experts who engage in controversies on these matters should learn from this book."--Avinash Dixit, Princeton University "This book presents one of the first comprehensive attempts to bring rigorous theoretical foundations into the debate on the international financial architecture. The analysis is simple, elegant, and yields insights that are often unconventional and always thought-provoking. This is an indispensable reference for all economists interested in the current debates on the international financial architecture."--Olivier Jeanne, International Monetary Fund This book has been translated into:
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