Table of Contents

A Handbook of Alternative Monetary Economics

A Handbook of Alternative Monetary Economics

Elgar original reference

Edited by Philip Arestis and Malcolm Sawyer

This major Handbook consists of 29 contributions that explore the full range of exciting and interesting work on money and finance currently taking place within heterodox economics. There are many themes and facets of alternative monetary and financial economics but two major ones can be identified.

Chapter 23: Banking and Financial Crises

Gary A. Dymski

Subjects: economics and finance, financial economics and regulation, money and banking, post-keynesian economics

Extract

23 Banking and financial crises Gary A. Dymski 1. Introduction The past 25 years have witnessed an endless succession of financial crises. A partial list includes the 1980s Latin American debt crisis, the 1980s US savings-and-loan crisis, the 1990s Japanese banking crisis, the 1994–95 Mexican banking and currency crisis, the 1997–98 East Asian financial crisis, the 1998–99 Russia/Brazil currency crisis, the 2000–2001 Turkish currency crisis, and the 2001–2002 Argentine currency and banking crisis.1 The global economy has been ever prone to financial crises (Kindleberger, 1978), but never with this pace and depth. Why now? What is special about this period, and what do heterodox economists have to say about these events? Global financial deregulation and liberalization are clearly defining characteristics of the current period – but what is the connection between these phenomena and the landscape of financial and banking crises? This chapter delineates and contrasts orthodox and heterodox approaches to finance and banking and to contemporary financial crises. In the orthodox view, globalization and liberalization are exposing weaknesses in developing nations’ regulatory frameworks, forcing the abandonment of non-market mechanisms for allocating credit, and expanding the set of assets whose prices are moved in part by uninformed and panicky traders. This said, the social damage caused by financial crises in this period is temporary, part of the price to be paid for the transition in developing nations from state-led to market-led growth. In the heterodox view, by contrast, the liberalization and marketization girdling the world...

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