Time for a Visible Hand: Lessons from the 2008 World Financial Crisis

by Stephany Griffith-Jones, Josï Antonio Ocampo, Joseph E. Stiglitz

Overview

The financial crisis, which originated in developed country financial markets, has spread to developing countries and has turned into a global financial meltdown. Governments and Central Banks—though taking many and costly measures—seem powerless to stop the crisis. In light of this major global crisis that is hurting economies across the globe, this highly topical book focuses on the transparency and regulatory measures that become desirable after the current crisis; the implications of both the crisis and regulatory discussions for developing and developed economies; and reforms in the global financial architecture that might make the global financial system more stable and more equitable.

Given the depth of the current financial crisis, the world economy is in unchartered territory. As a consequence, this book aims to systematically understand current major problems, both in the financial system, its governance, and in its links to global economic imbalances. It will try to explain how both market actors and regulators behavior, as well as how the prevailing ideology of extreme financial liberalization without sufficient regulation contributed to the financial crisis. The book presents radical, but specific and politically feasible, proposals to try to ensure a more stable, equitable and growing world economy.

Contributions are written by leading authorities in their field, with a mixture of very senior national—as well as international—policy makers, practitioners from the private sector, and leading academics; contributors come from both developed and developing countries.

Product Details

ISBN-13:	9780199578818
Publisher:	Oxford University Press
Publication date:	03/12/2010
Series:	Initiative for Policy Dialogue
Edition description:	New Edition
Pages:	376
Product dimensions:	5.90(w) x 9.10(h) x 0.90(d)

About the Author

Stephany Griffith-Jones is an economist whose areas of expertise include global capital flows to emerging markets and international financial reform. Prior to joining IPD, Professor Griffith-Jones was Professorial Fellow at the Institute of Development Studies at University of Sussex and served as Senior Official at the United Nations Department of Economic and Social Affairs and the Economic Commission of Latin America (ECLAC), and as Head of International Finance at the Commonwealth Secretariat. She has acted as senior consultant to governments in Eastern Europe and Latin America and to many international agencies, including the World Bank and United Nations. She began her career at the Central Bank of Chile. She has published many articles and books including International Finance and Development with Jose Antonio Ocampo and Jan Kregel. She received the Association of Latin American Financial Institutions prize for best essay on Latin America's international finance. José Antonio Ocampo is Professor in the School of International and Public Affairs and Fellow of the Committee on Global Thought at Columbia University. Prioir to this, Professor Ocampo served as the United Nations Under-Secretary-General for Economic and Social Affairs, and head of UN Department of Economic and Social Affairs (DESA), as Executive Secretary of the UN Economic Commission for Latin America and the Caribbean (ECLAC), and has held a number of high-level posts in the Government of Colombia, including Minister of Finance and Public Credit and Director of the National Planning Department. He has also served as Executive Director of FEDESARROLLO, the main think tank on economic issues in Colombia, Director of the Centro de Estudios sobre Desarrollo Economico of Universidad de los Andes, Professor of Economics at Universidad de los Andes, and Professor of Economic History at Universidad Nacional de Colombia. He has also been Visiting Professor at Cambridge, Oxford and Yale Universities. Joseph E. Stiglitz holds joint professorships at Columbia University's Economics Department and its Business School. He is co-chair of IPD's macroeconomics, CML, and Intellectual Property Task Forces. From 1997 to 2000 he was the World Bank's Senior Vice President for Development Economics and Chief Economist. From 1995- 97 he served as Chairman of the U.S. Council of Economic Advisers and as a member of President Clinton's cabinet. From 1993 to 1995 he was a member of the Council of Economic Advisers. He was previously a professor of economics at Stanford, Princeton, Yale, and All Souls College. Dr Stiglitz is a leading scholar of the economics of the public sector and was awarded the Nobel Prize in Economics in 2001 in addition to the American Economic Association's biennial John Bates Clark Award in 1979. His work has been recognized through his election as a fellow to the National Academy of Sciences, the American Academy of Arts and Sciences, the Econometric Society, and the British Academy.

Table of Contents

List of Figures ix

List of Tables x

Contributors xi

Acronyms xiv

1 Introduction Stephany Griffith-Jones Jos? Antonio Ocampo Joseph E. Stiglitz 1

Part I The Crisis in the United States

2 The Financial Crisis of 2007-8 and its Macroeconomic Consequences Joseph E. Stiglitz 19

3 Sub-Prime Finance: Yes, We are Still in Kansas Gerard Caprio, Jr. 50

4 Background Considerations to a Re-Regulation of the US Financial System: Third Time a Charm? Or Strike Three Jan Kregel 62

5 Responding to the Crisis Joseph E. Stiglitz 76

Part II Reforming Financial Regulation

6 Central Banks, Liquidity, and the Banking Crisis Philip Turner 101

7 Agenda and Criteria for Financial Regulatory Reform Jane D'Arista Stephany Griffith-Jones 126

8 The Role of Policy and Banking Supervision in the Light of the Credit Crisis Avinash D. Persaud 150

9 How, If At All, Should Credit Rating Agencies (CRAs) Be Regulated? C. A. E. Goodhart 164

10 Credit Default Swaps: The Key to Financial Reform Perry Mehrling 185

11 Governing the Global Regulatory System Marion Williams 200

Part III Developing Country Perspectives

12 The Management of Capital Flows and Financial Vulnerability in Asia Yilmaz Aky?z 219

13 Regulation of the Financial Sector in Developing Countries: Lessons from the 2008 Financial Crisis Y. V. Reddy 242

14 Economic Development and the International Financial System Roberto Frenkel Martin Rapetti 253

15 The Accumulation of International Reserves as a Defense Strategy Fernando J. Cardim de Carvalho 269

Part IV Reforming the Global Monetary System

16 Reforming the Global Reserve System Jos? Antonio Ocampo 289

17 A Modest Proposal for International Monetary Reform Bruce Greenwald Joseph E. Stiglitz 314

Index 345

Editorial Reviews

"Impressive and important... It is hard to imagine a more qualified team of editors in this field. The sheer amount of expertise packed into this volume makes it a very valuable resource indeed. It may not be an exaggeration to describe this book as indispensable in the study of just exactly what happened in late 2008 and what needs to be done to prevent such a profound crisis from striking again.... Readers of Time for a Visible Hand can expect to be well-informed and well-equipped after being exposed to such a wide range of thinkers and policy-makers. This publication may well take on a definitive 'textbook' status in years to come."—Journal of General Management

From the Publisher