National Tamers versus Global Tigers
Chapter 14: The golden mean
14. The golden mean Auream quisquis mediocritatem diligit, tutus caret obsoleti sordibus tecti, caret individenda sobrius aula.* Horace (Odes, II, 10) There is a tide in the aﬀairs of men, Which, taken at the ﬂood, leads on to fortune; Omitted, all the voyage of their life is bound in shallows and in miseries. On such a full sea are we now aﬂoat; and we must take the current when it serves, or lose our ventures. William Shakespeare (Julius Caesar, Act IV, Scene 3) 14.1 HAVE THE TIGERS BEEN TAMED? The conclusion I have drawn from the critical rereading of the history of ﬁnancial globalization outlined in the previous chapters is that a key factor in the episodes of monetary and ﬁnancial instability that have occurred since the mid-1980s has been the interaction between the monetary policies of the leading countries and the working of global ﬁnancial markets. A central role in this interaction has been played by the exchange rate policies pursued both by the major industrial countries and by emerging market economies. I have also argued that the responses by governments and international ﬁnancial institutions to the challenges posed by globalization have been either too narrowly focused when designed to be quickly implemented, or eﬀective only in the long-run when conceived on a global scale. Substantial ﬁnancial assistance has been granted to countries aﬀected by crises and, from time to time, concerted strategies have been adopted to correct exchange rate misalignments. On a macroeconomic level,...
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