David Andrew Singer

Regulating Capital: Setting Standards for the International Financial System

1. Introduction: Financial Regulators and International Relations2. Capital Regulation: A Brief Primer3. Regulators, Legislatures, and Domestic Balancing4. Banking: The Road to the Basel Accord5. Securities: Financial Instability and Regulatory Divergence6. Insurance: Domestic Fragmentation and Regulatory Divergence7. Conclusion: The Future of International Regulatory HarmonizationNotes Reference Index

Migrant Remittances and Exchange Rate Regimes in the Developing World

This article argues that the international financial consequences of immigration exert a substantial influence on the choice of exchange rate regimes in the developing world. Over the past two decades, migrant remittances have emerged as a significant source of external finance for developing countries, often exceeding conventional sources of capital such as foreign direct investment and bank lending. Remittances are unlike nearly all other capital flows in that they are stable and move countercyclically relative to the recipient countrys economy. As a result, they mitigate the costs of forgone domestic monetary policy autonomy and also serve as an international risk-sharing mechanism for developing countries. The observable implication of these arguments is that remittances increase the likelihood that policy makers adopt fixed exchange rates. An analysis of data on de facto exchange rate regimes and a newly available data set on remittances for up to 74 developing countries from 1982 to 2006 provides strong support for these arguments. The results are robust to instrumental variable analysis and the inclusion of multiple economic and political variables.

The Global Financial Crisis: Lessons and Opportunities for International Political Economy

The global financial crisis that began in 2007 is a once-in-a-lifetime event with wide-ranging consequences for government policymaking. The crisis has prompted much soul-searching among economists and financial experts who failed to anticipate it, or whose warnings were not taken seriously by regulators and investors. Scholars of international political economy (IPE), however, are generally not in the business of predicting financial crises or recessions, and so the field is unlikely to see the crisis as a manifestation of scholarly failure. Yet the crisis may have an appreciable impact on the trajectory of IPE, just as the downfall of the Soviet Union shaped subsequent scholarship on international relations and great-power conflict and prompted a movement away from grand, and toward mid-range, theories. We discuss three categories of inquiry—or puzzles within the realm of global finance—that have received relatively little attention within the field of IPE, but which should receive greater scrutiny as a result of the crisis: the determinants of cross-national variation in financial regulation; patterns of cooperation and discord within global regulatory bodies and the involvement of emerging-market countries in these bodies; and the interplay between individual firms-as-political-actors and public policy outcomes.

Financial Regulation, Monetary Policy, and Inflation in the Industrialized World

This article argues that the institutional mandates of central banks have an important influence on inflation outcomes in the advanced industrialized countries. Central banks that are also responsible for bank regulation will be more sensitive to the profitability and stability of the banking sector and therefore less likely to alter interest rates solely on the basis of price stability objectives. When bank regulation is assigned to a separate agency, the central bank is more likely to enact tighter monetary policies geared solely toward maintaining price stability. An econometric analysis of inflation in 23 industrial countries from 1975 to 1999 reveals that inflation is significantly higher in those countries with central banks that are vested with bank regulatory responsibility, although this effect is conditional on the choice of exchange rate regime and the relative size of the banking sector. We also conduct a case study of the Bank of England, which lost its bank regulatory authority to a new agency in 1998. We find that the new Labour government under Tony Blair imposed the institutional change on the Bank of England in part to remove the bank stability bias from its monetary policymaking. These findings suggest that the mandates of central banks not only have important influences on macroeconomic outcomes, but may also be modified in the future by governments seeking to impose their own monetary policy preferences.

Monetary Institutions, Partisanship, and Inflation Targeting

Since 1989, twenty-five countries have adopted a monetary policy rule known as inflation targeting (IT), in which the central bank commits to using monetary policy solely for the purpose of meeting a publicly announced numerical inflation target within a particular time frame. In contrast, many other countries continue to conduct monetary policy without a transparent nominal anchor. The emergence of IT has been almost completely ignored by political scientists, who instead have focused exclusively on central bank independence and fixed exchange rates as strategies for maintaining price stability. We construct a simple model that demonstrates that countries are more likely to adopt IT when there is a conformity of preferences for low-inflation monetary policy between the government and the central bank. More specifically, the combination of a right-leaning government and a central bank without bank regulatory authority is likely to be associated with the adoption of IT. Results from a spatial autoregressive probit model estimated on a time-series cross-sectional data set of seventy-eight countries between 1987 and 2003 provide strong statistical support for our argument. The model controls for international diffusion from neighboring countries by accounting for spatial dependence in the dependent variable, but our results indicate that domestic interests and institutions - rather than the influence of neighboring countries - drive the adoption of IT.

Exchange Rate Proclamations and Inflation-Fighting Credibility

If governments choose economic policies that often run counter to their public commitments, are those commitments meaningless? We argue that government proclamations can be critical in signaling economic policy intentions. We focus on the realm of exchange rate policy, in which countries frequently implement an exchange rate regime that differs from the officially declared regime. We argue that the official exchange rate regime is one of the most important signals of a governments economic policy preferences. When a government makes a de jure public commitment to a fixed exchange rate, it sends a signal to domestic and international markets of its strict monetary-policy priorities. In contrast, a government that proclaims a floating exchange rate signals a desire to retain discretion over monetary policy, even if it has implemented a de facto fixed rate. We use data on up to 110 developed and developing countries from 1974-2004 to test two hypotheses: first, that governments that adopt de facto fixed exchange rates will experience less inflation when they back up their actions with official declarations; and second, that governments that abide by their commitments - as demonstrated by a history of following through on their public declarations of a fixed exchange rate regime - will establish greater inflation-fighting credibility. Within developing countries, democratic institutions enhance this credibility. Results from fixed-effects econometric models provide strong support for our hypotheses.

The Family Channel: Migrant Remittances and Government Finance

This paper argues that migrant remittances can ease government access to capital, generate tax revenue through household consumption, and ultimately allow governments to expand their size. The paper offers three empirical tests. First, using data for 76 developing countries from 1980 to 2007, I find that remittance inflows are associated with greater total government expenditures, whereas other forms of economic integration - especially trade - reflect the conventional view of the constraining influence of global markets. I then explore the possible causal mechanisms behind these results. In the second analysis, I find that remittances are associated with greater tax revenue due to the link between remittances, household consumption, and consumption taxes. These results are robust to using an instrumental variable approach based on exogenous variation in the wealth of migrant host countries. The third test explores the determinants of sovereign borrowing costs in emerging markets and finds that remittances are associated with lower sovereign spreads. The results suggest that private household financial flows can provide financial resources and ease access to credit to governments in developing countries.

Tipping the (Im)balance: Capital inflows, financial market structure, and banking crises

An emerging consensus among scholars and policy‐makers identifies foreign capital inflows as one of the primary determinants of banking crises in developed countries. We challenge this view by arguing that external imbalances are destabilizing only when banks face substantial competition from securities markets in the process of financial intermediation. We assemble a dataset of banking crises covering the advanced industrialized countries from 1976 to 2011 and find evidence of a conditional relationship between capital inflows, a well‐developed securities market, and the incidence of banking crises. We further explore the impact of capital inflows on banks’ actual risk taking as indicated by their capital adequacy levels and measures of insolvency risk. Our results demonstrate that prudential capital cushions tend to decline with the combination of capital inflows and prominent securities markets. We highlight the political decisions—often made during the early days of a countrys financial development—that determine the relative prominence of banks vs. non‐bank financial institutions and conclude with policy recommendations.

Creating Competitive Markets: The Politics of Regulatory Reform

Creating Competitive Markets: The Politics of Regulatory Reform. Edited by Marc K. Landy, Martin A. Levin, and Martin Shapiro. Washington, DC: Brookings Institution Press, 2007. 368p.

Taking Stock Seriously: Equity-Market Performance, Government Policy, and Financial Globalization

59.95 cloth,