Serrano, Summa and Marins on Inflation, and Monetary Policy

This is the full round table on Inflation and Monetary Policy organized by the Bucknell Institute for Public Policy (BIPP), with Franklin Serrano, Ricardo Summa and Nathalie Marins.

Chang & Grabel on The End of The Neoliberal Approach To Development

The following is an extract from Ha-Joon Chang and Ilene Grabel's new book Reclaiming Development: An Alternative Economic Policy Manual :

We should take note of what we see as the beginning of the end of the neoliberal approach to development. The process of discrediting that development model begins in the aftermath of the east Asian financial crisis of 1997–98. At the time there appeared to be nothing new in the nature of the east Asian crisis or in the crisis response. But, in fact, the east Asian crisis marked the gradual beginning of the end of the neoliberal consensus in the development community. The severe constraints on policy space that followed the east Asian crisis created momentum behind a new vision – that developing countries had to put in place new strategies and institutions to prevent a repeat of the events of the late 1990s. Policymakers in a number of Asian countries and in other successful developing countries sought to insulate themselves from the hardships and humiliations suffered by east Asian policymakers at the hands of the IMF. Indeed, as a consequence of the crisis, the IMF suffered a loss of purpose, standing and relevance. In the early 2000s, demand for the institution's resources was at a historic low. In 2005, just six countries had standby arrangements with the fund, the lowest number since 1975. From 2003 to 2007, the fund's loan portfolio shrank dramatically: from $105bn (£63bn) to less than $10bn. The fund's loan portfolio contracted even further after the loans associated with the east Asian crisis were repaid, as those countries that could afford to do so deliberately turned away from the institution. This trend radically curtailed the geography of the IMF's influence. In this context, the IMF began to soften its traditional opposition to policies that regulate the international movement of capital (ie policies called "capital controls"). At the same time, the World Bank also began to show signs of grudging change in its traditional opposition to industrial policy.

Read the rest here.

Note: Chang & Grabel's book has an introduction written by Robert Hunter Wade. Although I could not transcribe parts of his intro into this post, let it be known that much of Wade's position with respect to the topic at hand is illustrated here.

Jane D'Arista - Tapering of Quantitative Easing Is Throwing Emerging Markets into Chaos

From The Real News Network

Emerging markets have been reeling since the beginning of the new year. The currencies and stock markets of Argentina, South Africa, Turkey, among other countries, have declined substantially, prompting their central banks to increase interest rates to stem the outflow of capital. The emerging-market rout, the worst start to a year on record, is widely believed to be related to the winding down of the U.S. Federal Reserve's quantitative easing program.Now joining us to discuss this is Jane D'Arista. She's a research associate with the Political Economy Research Institute, or PERI, at the University of Massachusetts, Amherst, where she also cofounded an economist committee for financial reform called SAFER, or Stable, Accountable, Fair and Efficient Financial Reform.

See here

More on the 'emerging' markets crisis

The Lex column in the FT today also argues that the crisis is going to get much worse in developing countries. Their argument is based on the current account deficits. I've discussed that yesterday here. Note that the figure used to illustrate the point shows the current account as a share of GDP (as a share of exports is always better, since it gives a sense of the amount of the country's source of hard currency), and also the stock market, which seems to be doing better in countries with surpluses.

The figure actually shows that the only two countries with relatively large current account deficits are Turkey and South Africa. Brazil and India, for example, have deficits that are not that large. Argentina, not shown in the picture, and with more problems than most in it, has a practically balanced current account. Of course the FT, like Roubini, suggests that contractionary policies are what the Dr. recommends. Oh well.