Rogerio Studart

Financial Regulation and Supervision in Emerging Markets. The Experience of Latin America since the Tequila Crisis

The increasing integration of international financial markets poses new challenges to domestic financial markets everywhere, but especially those in emerging economies. The financial crises of 1994–95 and 1997–98 sounded wake-up calls to Latin America and East Asia, respectively, indicating that regulation and supervision needed to be strengthened substantially. Since then important steps have been taken to improve the rules and ensure their implementation, but financial regulation and supervision do not take place in a vacuum. On the one hand they must be consistent with domestic macro-economic policies, and they need a supportive macroeconomic environment in which to operate — as the Argentine crisis that began in 2001 shows only too well. On the other hand they have to take into account the international rules set by the Bank for International Settlements (BIS), the International Monetary Fund (IMF) and other institutions.

The efficiency of financial systems, liberalization, and economic development

For at least twenty years, mainstream development economists have argued that financial liberalization is the road to higher levels of domestic savings/investment and more efficient allocation of capital. Efficiency is thus clearly associated with a more liberalized, deregulated financial system. This argument, in turn, is implicitly based on the dominant view on the working of financial markets that is, that financial institutions can be pictured as mere intermediaries between savers and investors. Further, the argument also relies on the view that the prices of financial assets reflect the underlying conditions of the final issuers of such assets, a view that has more recently been formalized as the efficient market hypothesis. If financial markets are the loci of allocation of capital, and asset prices are shown to guide savers toward investment with the highest productivity, financial markets are efficient allocators of capital. The aim of this article is to present a critical assessment of the concept of macroeconomic efficiency usually implicit in most mainstream analyses, and, therefore, of the financial liberalization hypothesis. Furthermore, this critical appraisal will be the basis upon which we will attempt to build an alternative Post Keynesian view of the role of the financial system in economic development. Such a view is concerned not so much with answering established questions (such as, Should we liberalize or not, and how rapidly?), as with presenting a set of other relevant, but often forgotten, ques

Dollarization: “An Intellectual Fad or a Deep Insight”?

The financial turmoil that has characterized Latin America and the Caribbean since the eruption of the Asian crisis has reopened the debate on the optimum choice of exchange rate regimes (ERR) to the region, 1 and, in consequence, the role monetary policy has in adjustment in view of external shocks. The debate on full dollarization has become a catalytic forum to discuss the roles, the limits and perspectives of exchange rate and monetary policy in the current international (financial) scenario. Economic literature on optimum ERR has, for the last 50 years at least, been anchored on the effects and possible responses of domestic policy-makers to demand shocks or term-of-trade shocks (T-shocks). In a way, financial shocks-for instance, rapid reversal of foreign capital flows to developing economies-are not captured by the literature. The reason for this seems to be the view that finance in the long run is not an

Financial repression and economic development: towards a post-Keynesian alternative ∗

The Shaw–McKinnon framework, the foundation of mainstream thinking on the role of financial markets and institutions in economic development and the basis for policy-making in many LDCs for the last 18 years, is shown to be flawed when viewed in a post-Keynesian perspective. Three interrelated aspects of post-Keynesian theory are used to challenge the financial liberalization models and to posit an alternative post-Keynesian perspective on the role of financial institutions and markets in economic development. These aspects are: (1) the finance-investment-saving-funding circuit; (2) the financial fragility hypothesis; and (3) the evolution of institutions and conventions in an uncertain world.

Regional Integration and the Issue of Choosing an Appropriate Exchange-Rate Regime in Latin America

This book is an up-to-date, authoritative and comprehensive analysis of the key issues and challenges facing regional currency area projects in the context of financial globalization. The authors focus on several central issues that emerged during the experiences of the 1990s and 2000s: exchange rate regimes and optimal currency area theory; exchange rate regimes in emerging countries, international capital markets and regional currency areas; EMU and the euro; exchange rate regimes in Central and Eastern Europe, Asia and Latin America; dollarization and the coordination of macroeconomic policies in the presence of regional currency areas.