Handbook of the International Political Economy of Monetary Relations
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Handbook of the International Political Economy of Monetary Relations

Edited by Thomas Oatley and W. Kindred Winecoff

This extensive Handbook provides an in-depth exploration of the political economy dynamics associated with the international monetary and financial systems. Leading experts offer a fresh take on research into the interaction between system structure, the self-interest of private firms, the political institutions within which governments make policy, and the ideas that influence beliefs about appropriate policy responses. Crucially they also assess how these factors have shaped the political economy of various facets of monetary and financial systems.
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Chapter 14: Financial crises and the politics of adjustment and reform

Thomas B. Pepinsky


This chapter is a critical survey of the literature on international financial crises and their consequences for national politics, with a focus on national level policy choices and political outcomes. The types of financial crises covered in this chapter encompass any crisis that has causes or features that span national borders, and therefore include global and regional financial crises, national banking crises caused by cross border contagion, and stand alone currency and debt crises such as that experienced by Argentina in the early 2000s (due to its cross border features). The chapter is organized around the idea that responses to financial crises are necessarily political. While governments' responses to financial crises are surely affected by the severity of the crisis or the precise technical constraints surrounding policy choice, these factors never solely determine policy responses. Instead, financial crises should be understood to be the sources of political battles, and policy responses must be understood in light of the political context in which adjustment policy decisions are made. I organize the politics of adjustment policy and reform around three analytical frameworks. The first of these concerns the distributional consequences of financial crises. Financial crises are economic phenomena, and as such, it makes sense to start with their economic effects and the distributional costs that various adjustment and reform strategies entail. The second framework encompasses the institutional constraints on economic policymaking.

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