Money, Method and Contemporary Post-Keynesian Economics
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Money, Method and Contemporary Post-Keynesian Economics

Edited by Sheila Dow, Jesper Jespersen and Geoff Tily

This volume concentrates on contemporary Post-Keynesian contributions in money, method and economic policy. Post-Keynesian economics shares with Keynes the ambition of understanding the economy as a whole and as an integrated part of society. The book begins by analysing money, banks and finance as dynamic phenomena, followed by chapters focusing on methodological themes such as uncertainty, longer-term issues, sustainability and other non-monetary economic activities.
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Chapter 5: Financial fragility in Asia

Jayati Ghosh

Abstract

For more than half a century, particularly over the period from the second half of the 20th century onwards, financial systems in Asia were known for their diversity that reflected particular national economic trajectories, as well as a significant degree of state control and direction of finance. The history of post-World War II development in the Asian region suggests that these diverse financial structures served these countries well, to the point that such diversity and public control has been seen as central to the realisation of developmental successes in countries such as Japan, South Korea and Taiwan. Despite this, there is also much evidence that monetary, fiscal and financial policies and the associated macroeconomic scenarios have been converging across Asian countries since the onset of financial liberalisation in the early 1990s, and even more so since the Southeast Asian financial crisis of 1997. Thus, a recent feature of financial systems in Asia is a strong trend towards convergence of what were very different, and are still dissimilar, financial structures. The process of liberalisation is establishing in the region financial structures resembling those prevailing in the Anglo-Saxon world, with similar markets, institutions, instruments and regulatory frameworks. This is ironic and somewhat surprising, because as early as the 1990s, the Savings and Loans crisis in the United States had revealed that deregulated financial systems, besides being unsuited to financing long-term productive investments, are prone to institutional failure and even systemic collapse. Thereafter, the Global Financial Crisis of 2008–09, with its origins in the US sub-prime housing debacle, provided even more evidence of the dangers of deregulated finance – dangers that are likely to be much greater in countries where the development project is still incomplete.

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