Patterns of Adjustment in the Age of Finance: The Case of Turkey as a Peripheral Agent of Neoliberal Globalization A. Erinç Yeldan

[Working Paper No. 01/2009] Following the 2000-01 crisis, Turkey implemented an orthodox strategy of raising interest rates and maintaining an overvalued exchange rate. But, contrary to the traditional stabilization packages that aim to increase interest rates to constrain domestic demand, the new orthodoxy aimed at maintaining high interest rates to attract speculative foreign capital. The end result was shrinkage of the public sector, deteriorating education and health infrastructure, and failure to provide basic social services to the middle class and the poor. Furthermore, as the domestic industry intensified its import dependence, it was forced to adapt increasingly capital-intensive foreign technologies…

Back to the Future: Latin America’s Current Development Strategy Esteban Pérez Caldentey and Matías Vernengo

[Working Paper No. 07/2008] From 2002 to 2006, Latin America registered one of the highest average growth rates in over two decades. The empirical evidence suggests that the good economic performance of the last 6 years (including 2007-08) is increasingly and strongly correlated either with a positive terms-of-trade shock, mostly in South America, or with the increase in the flow of remittances, particularly in Central and North America. In other words, Latin America now exports commodities and people. The paper shows the possible limitations of this development strategy. 07_2008 (Download the full text in PDF format)  

The New Regionalism in Southeast Asian Trade Policy and Issues in Market Access and Industrial Development: An Analysis of the ASEAN-China Free Trade Agreement Smitha Francis and Murali Kallummal

[Working Paper No. 06/2008] This paper argues that the recent bilateral free trade initiatives of ASEAN members and, in particular, the ASEAN-China free trade agreement (ACFTA), are driven by ASEAN’s desire to maintain its export growth based on the regional production networks promoted by multinational corporations. The paper undertakes an analysis of ASEAN-China bilateral trade and the tariff preferences under the ACFTA to understand the actual prospects for Southeast Asian countries to expand their market access. It is concluded that without effective strategies for industrial upgradation and restructuring at the national levels, ASEAN’s attempts to obtain increased investment and export…

Endogenous Money in the Age of Financial Liberalization Gökçer Özgür and Korkut A. Ertürk

[Working Paper No. 05/2008] The paper reports results showing a much weakened statistical relationship between total bank credit, total deposits and the broad money supply for the period after 1995 for the US, where no statistical causation can be discerned in either direction. This has been the result of the changing nature of the credit creation process where banks have acquired almost total independence in extending credit from required reserves and core deposits and an ability to circumvent the constraint posed by capital requirements through asset securitization. Because of the explosive increase in nonbank intermediation this has caused, the expansion…

Using Minsky’s Cushions of Safety to Analyse the Crisis in the U.S. Subprime Mortgage Market Jan Kregel

[Working Paper No. 04/2008] Hyman P. Minsky's financial fragility hypothesis appears highly relevant in understanding the current crisis in the financial systems of developed countries. His most important contribution to our understanding of the logic of repeated financial crises under capitalism is that of endogenous instability, expressed in terms of a declining 'margin' or 'cushion' of safety in financial transactions and an increase in financial leverage that he called 'layering.' However, the paper also argues that the current crisis differs in important respects from the traditional analysis of a Minsky crisis. These differences have had a significant impact on the…

Regional Trade Agreements and Improved Market Access in Developed Countries: A Reality Check and Possible Policy Alternatives Parthapratim Pal

[Working Paper No. 03/2008] This paper investigates issues related to motivation, market access and costs in the context of Regional Trade Agreements (RTAs), and tries to understand whether there is any clear pattern between the signing of RTAs by developing countries and increase in their market share in developed countries. It also analyzes the possible costs a developing country will have to bear to gain the actual preferential market access. 03_2008  (Download the full text in PDF format)

Growth Patterns, Income Distribution and Poverty: Lessons from the Latin American Experience Carlos Aguiar de Medeiros

[Working Paper No. 02/2008] This paper explores some of the factors linking income growth, income distribution and poverty, historically observed in LACs, with particular reference to the recent experiences in Argentina, Brazil, Chile, Mexico and Venezuela. Given that the LACs have historically shown a high level of income concentration by all measures along with a high level of poverty which has invited a multitude of interpretations, this paper tries to analytically explore some myths on Latin American income distribution that are ingrained in the conventional literature. 02_2008 (Download the full text in PDF format)

On the Political Economy of Monetary Policy Saul Keifman

[Working Paper No. 01/2008] Little progress has been made so far in understanding the causes of Argentina's worst socio-economic crisis. This paper analyzes the intellectual roots of Argentine convertibility as a small contribution to this necessary and pending discussion. The country implemented a radical monetary reform, technically known as a currency board, although its popular name was "Convertibility", allegedly launched to impose fiscal discipline and gain credibility. This paper argues that it is very important to understand that Argentina's problems with the currency board stem from major flaws in its underlying theoretical model, which is based on the assumptions of…

Public Enterprises in Mixed Economies: Their Impact on Social Equity Andong Zhu

[Working Paper No. 04/2007] The underlying theoretical argument of Privatization, as a crucial component of the neoliberal policies, is that state-owned enterprises (SOEs) are inherently inefficient, and therefore bad for social equity, besides hindering economic growth. However, the existing literature falls short of providing a solid theoretical basis for this argument. This study improves upon the existing literature through utilization of a panel data set of more than 40 mixed economies for the period 1960s to the 1990s. By applying the fixed effects techniques, this study empirically explores the impact of SOEs on income equality. The conclusion arrived at, is…

IT-driven Offshoring: The Exaggerated “Development Opportunity” C. P. Chandrasekhar and Jayati Ghosh

[Working Paper No. 03/2007] This paper considers the recent boom in IT-driven offshoring in India and examines the potential for this to become a major source of economic growth in the future. Currently there is much optimism about the benefits that the new trend can bring to India and other similarly placed countries, as growth in services is seen as more likely to deliver employment, income and export revenue increases than growth in the commodity producing sectors. But such optimism may be misplaced given the relatively small share of this sector in total output and employment, as well as the…