Countervailing Monetary Power: Emerging Markets and the Re-Regulation of Cross-Border Finance

This resarch project examines the economic theory, policy, and international political economy of cross border finance in the run up to and in the wake of the global financial crisis of 2008.

Since the demise of the Bretton Woods system, a system where regulating cross-border finance was the norm, the global community has lacked a forum for governing global capital flows. In the meantime, cross-border capital flows have increased by orders of magnitude, so much so that international asset positions now outstrip global economic output. Most cross-border capital flows occur among industrialized nations, but emerging markets with fledgling financial systems are increasing participants in the globalization of capital flows. While it is widely recognized that investment is an essential ingredient for economic growth, there is a growing concern that certain capital flows (such as short-term debt) can be de-stabilizing to developing country financial systems by causing asset bubbles, exchange rate appreciation, and beyond. There is a long history of debate over volatile capital flows and the appropriate government policies relating to them, and the global financial crisis has opened a new chapter in this debate, as pro-cyclical capital flows have been characteristic throughout. In the wake of the financial crisis, international arrangements such as the G-20 and IMF are considering new roles and rules for cross-border finance as well. This project examines the political economy of governing cross-border finance at the national and global levels.