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Banking, Monetary Policy and the Political Economy of Financial Regulation

Banking, Monetary Policy and the Political Economy of Financial Regulation

Essays in the Tradition of Jane D'Arista

Edited by Gerald A. Epstein, Tom Schlesinger and Matías Vernengo

The many forces that led to the economic crisis of 2008 were in fact identified, analyzed and warned against for many years before the crisis by economist Jane D’Arista, among others. Now, writing in the tradition of D’Arista's extensive work, the internationally renowned contributors to this thought-provoking book discuss research carried out on various indicators of the crisis and illustrate how these perspectives can contribute to productive thinking on monetary and financial policies.

Chapter 11: Rethinking the economics of financial capital mobility and capital controls

Thomas Palley

Subjects: economics and finance, financial economics and regulation, political economy, politics and public policy, political economy


The Third World debt emerged as an acute crisis in 1982 and has never ceased its harm, but the debt crisis is merely a symptom of deeper global financial imbalances. Much has happened since that time, including dubious debt relief programs two decades later (which actually increased low-income Africa’s annual repayments from 2006–11!) and amplified uneven development between regions of the South. Hence, we have to spend some time at the outset establishing context dating back several decades. Only then can we properly proceed to consideration of global reform proposals to assess their feasibility, with particular emphasis on Jane D’Arista’s Keynesian proposals, and then onwards to an alternative strategy – ‘bottom up’ – with the same aims as D’Arista but based upon different readings of the balance of forces and hence of the impetus for genuine reform, which in my view will continue to emerge at the national not international scale.

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