Andrews, DM. 1994. Capital mobility and state autonomy: toward a structural theory of international monetary relations. International Studies Quarterly: 193-218.
Capital mobility, it is argued in this piece, has become restrictive enought to be highlighted as a structure in the international system. This paper introduces the "capital mobility hypothesis". Also, it argues against generalizing about the effects that capital mobility will have on all states.
In exploring others who have looked at this topic: "In essence, the central claim of these theorists is that when capital is highly mobile across international borders, the sustainable macroeconomic policy options available to states are systematically circumscribed. International financial integration, so the argument goes, has raised the costs associated with pursuing monetary policies that diverge from regional or international trends. While differences in national preferences, the causal beliefs of policymakers and institutional affiliations may help shape particular patterns of adaptation, proponents of what may be termed the 'capital mobility hypothesis' maintain that changes in the external constraint confronting all states constitute a structural cause of observed shifts in the patterns of states' monetary policy behavior over time" (193-4).
"The central claim associated with the capital mobility hypothesis is that financial integration has increased the costs of pursuing divergent monetary objectives, resulting in structural incentives for monetary adjustment" (203).
Showing posts with label Capital Mobility. Show all posts
Showing posts with label Capital Mobility. Show all posts
Wednesday, March 25, 2009
Wednesday, January 21, 2009
Mody and Saravia: Catalyzing Capital Flows: Do IMF Programs Work as Commitment Devices?
A Mody and D Saravia, “Catalyzing Capital Flows: Do IMF Programs Work as Commitment Devices?,” in , 2003, 25-27.
“An objective of IMF programs is to help countries improve their access to international capital markets. In this paper, we examine if Fund programs influence the ability of developing country issuers to tap international bond markets and whether they improve spreads paid on the bonds issued. We find that the Fund programs do not provide a uniformly favorable signaling effect, i.e., the mere presence of the IMF does not act as a strong seal of good housekeeping. Instead, the evidence is most consistent with a positive effect of IMF programs when they are viewed as deteriorated significantly. The size of the Fund’s program matters, but the credibility of a joint commitment by the country and the IMF appears to be critical” (1).
“In this paper, we explore the possibility that successful catalysis depends on a credible joint commitment by the country and the Fund that leads to improved prospects for honoring debt contracts. In other words, the catalytic effect—or the Fund’s ‘seal of approval’—is not automatic and the mere presence of a Fund program does not lead to more capital flows. Rather, an IMF program is effective as a commitment device when other available information does not negate its credibility. As such, the value of the commitment implied by a Fund program and its ability to catalyze capital flows, is likely to depend on initial country conditions, program design, and the country-Fund relationship. Our contribution then is to move from a presumption of undifferentiated effects to identify country, program, and relationship characteristics that create the conditions for credible commitments and hence contribute to enhanced capital flows under IMF programs” (3).
They reach four conclusions:
1. Having a Fund program operative in a country decreased possible negative effects from a country’s volatility in exports
2. If reserves have not been reduced beyond recoverable levels, Fund programs are possibly helpful
3. Bigger Fund programs can be effective even when funds are not deployed
4. If a country and the Fund have an iterated interaction that is timely, success is also more likely.
They use a model of Eichengreen and Mody (2001) for their empirical analysis.
There is an excellent overview of the relationship between fund lending and improving access to international capital: while Fund lending may be quite small, it does provide the necessary sign to international capital that this country’s macroeconomic policies are on the right track.
There is a review of literature surrounding IMF lending policies. “Two early studies (Edwards 1989 and Khan 1990) reached three conclusions that have stood the test of time. First, Fund programs help improve the external payments position, this improvement takes effect relatively quickly, i.e., within a year, and is sustained beyond the program. Second, the impact on inflation is statistically insignificant. Third, growth actually suffers during the period of an IMF program but recovers once the program ends, though possibly not to the level prior to the initiation of the program” (8).
We adopt an estimation approach developed in earlier papers (see Eichengreen and Mody 2001). We estimate a two-equation model: the ‘spreads’ equation, which specifies the determinants of spreads charged, and the ‘selection’ equation, which is a probit for the decision to issue the bond” (11).
Skipped much here.
“…a Fund program is not an automatic or standardized ‘good housekeeping’ seal of approval. Investors appear to value the Fund’s participation in resolving the country’s external payment difficulties but only when they view it is as likely that the effort will be successful. Our further contribution, we believe, is to suggest the conditions under which programs are likely to succeed. Successful outcome, measured in this paper as improved access to international markets, depends on the market’s perception of credible reform measures” (22).
“An objective of IMF programs is to help countries improve their access to international capital markets. In this paper, we examine if Fund programs influence the ability of developing country issuers to tap international bond markets and whether they improve spreads paid on the bonds issued. We find that the Fund programs do not provide a uniformly favorable signaling effect, i.e., the mere presence of the IMF does not act as a strong seal of good housekeeping. Instead, the evidence is most consistent with a positive effect of IMF programs when they are viewed as deteriorated significantly. The size of the Fund’s program matters, but the credibility of a joint commitment by the country and the IMF appears to be critical” (1).
“In this paper, we explore the possibility that successful catalysis depends on a credible joint commitment by the country and the Fund that leads to improved prospects for honoring debt contracts. In other words, the catalytic effect—or the Fund’s ‘seal of approval’—is not automatic and the mere presence of a Fund program does not lead to more capital flows. Rather, an IMF program is effective as a commitment device when other available information does not negate its credibility. As such, the value of the commitment implied by a Fund program and its ability to catalyze capital flows, is likely to depend on initial country conditions, program design, and the country-Fund relationship. Our contribution then is to move from a presumption of undifferentiated effects to identify country, program, and relationship characteristics that create the conditions for credible commitments and hence contribute to enhanced capital flows under IMF programs” (3).
They reach four conclusions:
1. Having a Fund program operative in a country decreased possible negative effects from a country’s volatility in exports
2. If reserves have not been reduced beyond recoverable levels, Fund programs are possibly helpful
3. Bigger Fund programs can be effective even when funds are not deployed
4. If a country and the Fund have an iterated interaction that is timely, success is also more likely.
They use a model of Eichengreen and Mody (2001) for their empirical analysis.
There is an excellent overview of the relationship between fund lending and improving access to international capital: while Fund lending may be quite small, it does provide the necessary sign to international capital that this country’s macroeconomic policies are on the right track.
There is a review of literature surrounding IMF lending policies. “Two early studies (Edwards 1989 and Khan 1990) reached three conclusions that have stood the test of time. First, Fund programs help improve the external payments position, this improvement takes effect relatively quickly, i.e., within a year, and is sustained beyond the program. Second, the impact on inflation is statistically insignificant. Third, growth actually suffers during the period of an IMF program but recovers once the program ends, though possibly not to the level prior to the initiation of the program” (8).
We adopt an estimation approach developed in earlier papers (see Eichengreen and Mody 2001). We estimate a two-equation model: the ‘spreads’ equation, which specifies the determinants of spreads charged, and the ‘selection’ equation, which is a probit for the decision to issue the bond” (11).
Skipped much here.
“…a Fund program is not an automatic or standardized ‘good housekeeping’ seal of approval. Investors appear to value the Fund’s participation in resolving the country’s external payment difficulties but only when they view it is as likely that the effort will be successful. Our further contribution, we believe, is to suggest the conditions under which programs are likely to succeed. Successful outcome, measured in this paper as improved access to international markets, depends on the market’s perception of credible reform measures” (22).
Wednesday, November 26, 2008
Gill and Law: Global Hegemony and the Structural Power of Capital
S Gill and D Law, “Global Hegemony and the Structural Power of Capital,” Global Governance: Critical Concepts in Political Science 33, no. 4 (2004): 475-499.
"In this chapter we distinguish between direct and structural forms of power. We relate these to the concepts of hegemony, historic bloc and the 'extended' state, in our analysis of present-day capitalism. In so doing we seek to meet two major challenges. The first is to integrate better 'domestic' and 'international' levels of analysis. The second, related challenge, is to theorize the complementary and contradictory relations between the power of states and the power of capital" (93).
The authors start by distinguishing between the realist concept of hegemony and the Gramscian concept. The former argues that there is direct control of one over another, typically one state over another. The later concept argues that there is a set of structural forces that can exist that can create order. "A hegemonic order was one where consent, rather than coercion, primarily characterized the relations between classes, and between the state and civil society" (93).
"Our contribution here mainly concerns the theory of power. We assume that theories of power and hegemony must subsume both normative and material, structural and existential...dimensions of social relations. Part of the richness of Gramschi's concepts is that they combine these elements. Because of this, they offer clues for overcoming the gulf between structure and agency. We believe a possible key to the resolution of the structure-action problem in social theory more generally, and international relations theory in particular may be through the development of mediating concepts such as structural power and historical bloc" (94).3
We may be moving towards a post-Fordian conception of production, which is obviously global. Therefore, we must look at hegemony, blocs and the state from the perspective of the global. This involves a revolution in the social forms of accumulation. This has been referred to as a regime of accumulation. "A regime therefore broadly encompasses the forms of socio-economic reproduction which together constitute the conditions of existence of economic development in a particular historical period of epoch. As such there may be different regimes of accumulation...coexisting at any point in time" (95).
The post-WWII regime of accumulation was very successful at promoting growth in industrialized countries for four reasons. Firstly, the core (the US) was stable and secure. Secondly, the US was able to sustain growth through demand created through deficits and militarism. Thirdly, the system was sustained through "embedded liberalism". Finally, inexpensive inputs, especially oil.
"In a structural sense, what was occurring in the post-war period was the emergence of a globally integrated economy whilst political regulation at the domestic level was becoming ever-more comprehensive" (97).
The authors put emphasis on the emergence of capital markets as a crucial aspect of the establishment of capitalism as a socio-economic system. They expand on this by offering myriad examples of the power of international oligopolistic capital.
"At the international level, the bargaining power of transnational corporations would be reduced if most national governments were able to co-ordinate their regulations and financial concessions. however, even supposedly like-minded, and wealthy countries...like the EC have not been able to seriously discuss, let alone achieve this goal" (106).
"In this chapter we distinguish between direct and structural forms of power. We relate these to the concepts of hegemony, historic bloc and the 'extended' state, in our analysis of present-day capitalism. In so doing we seek to meet two major challenges. The first is to integrate better 'domestic' and 'international' levels of analysis. The second, related challenge, is to theorize the complementary and contradictory relations between the power of states and the power of capital" (93).
The authors start by distinguishing between the realist concept of hegemony and the Gramscian concept. The former argues that there is direct control of one over another, typically one state over another. The later concept argues that there is a set of structural forces that can exist that can create order. "A hegemonic order was one where consent, rather than coercion, primarily characterized the relations between classes, and between the state and civil society" (93).
"Our contribution here mainly concerns the theory of power. We assume that theories of power and hegemony must subsume both normative and material, structural and existential...dimensions of social relations. Part of the richness of Gramschi's concepts is that they combine these elements. Because of this, they offer clues for overcoming the gulf between structure and agency. We believe a possible key to the resolution of the structure-action problem in social theory more generally, and international relations theory in particular may be through the development of mediating concepts such as structural power and historical bloc" (94).3
We may be moving towards a post-Fordian conception of production, which is obviously global. Therefore, we must look at hegemony, blocs and the state from the perspective of the global. This involves a revolution in the social forms of accumulation. This has been referred to as a regime of accumulation. "A regime therefore broadly encompasses the forms of socio-economic reproduction which together constitute the conditions of existence of economic development in a particular historical period of epoch. As such there may be different regimes of accumulation...coexisting at any point in time" (95).
The post-WWII regime of accumulation was very successful at promoting growth in industrialized countries for four reasons. Firstly, the core (the US) was stable and secure. Secondly, the US was able to sustain growth through demand created through deficits and militarism. Thirdly, the system was sustained through "embedded liberalism". Finally, inexpensive inputs, especially oil.
"In a structural sense, what was occurring in the post-war period was the emergence of a globally integrated economy whilst political regulation at the domestic level was becoming ever-more comprehensive" (97).
The authors put emphasis on the emergence of capital markets as a crucial aspect of the establishment of capitalism as a socio-economic system. They expand on this by offering myriad examples of the power of international oligopolistic capital.
"At the international level, the bargaining power of transnational corporations would be reduced if most national governments were able to co-ordinate their regulations and financial concessions. however, even supposedly like-minded, and wealthy countries...like the EC have not been able to seriously discuss, let alone achieve this goal" (106).
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