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International Institutions and Multinational Enterprises

Global Players – Global Markets

Edited by John-ren Chen

This book provides rigorous analysis of the wide range of questions surrounding the role of international institutions in governing global business, especially multinational enterprises (MNEs). The analysis, both theoretical and empirical, focuses on the corporate governance of MNEs and to what extent their management takes into account the negative effects of their activities. Also discussed are: how nation states and international institutions control the activities of MNEs, and how the role and strategies of international institutions can be changed to minimise any negative effects without hampering the positive aspects and effects of MNEs.
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Chapter 11: International Institutions and Financial Market Stability

Klaus Liebscher


11. International institutions and financial market stability Klaus Liebscher INTRODUCTION Today’s liberalised and universal character of financial markets and capital flows has made it impossible for even the strongest national states to handle the governance of global finance on their own. Thus various networks of intergovernmental consultation and cooperation have developed in parallel with the accelerated globalisation of finance during recent decades. Ensuring financial market stability can, therefore, be regarded as a global public good. This rests on the simple observation that banks and other financial institutions operate in many different jurisdictions, very often without due cognisance of the consequences they may create. This requires that international agreements, cooperation and coordination ensure international public control, so that negative externalities such as systemic risk or the possible negative impact on economic growth due to financial instability are prevented as far as possible. In addition, international cooperation helps to ensure that a regulatory ‘level playing-field’ exists such that the possibility of regulatory arbitrage is avoided. International financial integration and its governance thus implies that central banks and other national authorities have to develop policies that foster financial stability not only on a domestic but also on an international level. Let me give you an example to underline my point by referring to the tragic events of 9/11. Without cooperation between the Eurosystem of Central Banks, the Federal Reserve and other international central banks, we might, indeed, have had a very negative impact upon the international financial system and even worse repercussions...

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