Financial Crises, Liquidity, and the International Monetary System

By Jean Tirole. 2002

493 citations recorded by the source corpus.

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 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.

Subfields: Finance

View Paper: https://www.semanticscholar.org/paper/634586a196c28933667ffcbe42ed807c2a8fb667

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Citations in the corpus

Privacy as a Public Good: A Case for Electronic Cash (2019, background): “Naturally, such a policy would require a careful balancing of all social costs and benefits of cash usage (Rogoff 2016; McAndrews 2017).”
Financial globalization and debt maturity in emerging economies (2006, unknown): “6 See, for example, Eichengreen and Wyplosz (1993), Krugman (1998), Rodrik (1998), Stiglitz (1999), and Tirole (2002).”
The bank liquidity smile across exchange rate regimes (2008, unknown): “A negative link with bank liquidity indicates that the crisis may be due to poor bank liquidity, which can result from a lending boom (see, for example, Tirole 2002 ).”
Central Bank Digital Currency: Motivations and Implications (2017, background): “Therefore, eliminating cash—at least larger-denomination notes—might inhibit criminal activity (Rogoff 2016).14 However, eliminating larger-value bank notes to inhibit criminal activity does not logically lead to, or require, a corresponding introduction of CBDC.”
Designing Central Bank Digital Currencies (2019, background): “Instead, in the constant returns to scale setup, rd = A− φ− 1 and therefore the deposit rate is irresponsive to θ and rcbdc 38The magnitude of negative externalities from cash is a topic of intense debate (Engert et al., 2018; McAndrews, 2017; Rogoff, 2016; Wright et al., 2017).”
The Positive Link between Financial Liberalization, Growth and Crises (2004, unknown): “(1999), Krugman (1999), Mckinnon and Pill (1998), and Tirole (2002).”
Long-Duration Bonds and Sovereign Defaults (Revised July 2009) (2009, unknown): “12See, for instance, Bi (2006), Bizer and DeMarzo (1992), Detragiache (1994), Hatchondo and Martinez (2007), Kletzer (1984), Sachs and Cohen (1982), and Tirole (2002).”
Central bank cryptocurrencies (2017, background): “Rogoff (2016) argues that $100 bills should be removed from circulation for the same reasons.”
Mobile Money and the Economy: A Review of the Evidence (2018, background): “7 On the merits of a cashless economy, including fighting corruption and money-laundering, see Rogoff (2016).”
Dynamical Hierarchical Tree in Currency Markets (2007, unknown): “According to Tirole [47] there are several hypothesis for the contagious aspects of crisis.”
Debt Dilution and Sovereign Default Risk (2011, unknown): “…and Jeanne (2009), Borensztein et al. (2004), Detragiache (1994), Eaton and Fernandez (1995), Kletzer (1984), Niepelt (2008), Sachs and Cohen (1982), Tirole (2002), and the references therein.5 As in previous work, we study the effects of debt dilution in the presence of the other two features…”