The potential of a properly regulated financial system to dampen rather than exacerbate shocks to developing economies has too often been overlooked. This chapter explores the potential of prudential regulations to dampen international capital flows, limit certain kinds of risk taking and help guard against systemic failures and international contagion.
Research has typically addressed capital account liberalization in terms of its growth effects. While no systematic growth benefits have been identified, potentially damaging poverty and inequality impacts have been overlooked. This paper identifies a number of channels through which these may occur. For policymakers, these are: increased instability of government finances, restricted policy freedom through “market discipline” and the direct costs of managing inflows. Financial market and industrial structure effects include: greater volatility in access to finance for households and small businesses, increasing industrial concentration and shifts in taxation away from capital and towards labour and consumption.
The paper examines the performance of highly indebted countries from the point of view of their links with the international financial market. Although the more analytical parts of the paper do not refer specifically to Latin America (LA) it considers the regional emergent markets’ experiences as examples and historical background. Two reasons explain the focus: LA countries participated in the financial globalization process from the beginning, in the late sixties-early seventies and the most important cases of high indebtedness took place in the region.
This note analyses the merits of including the Singapore issues in the Doha Development Round.
This paper discusses the benefits and risks that financial globalization entails for developing countries. Financial globalization can lead to large benefits, particularly to the development of the financial system. But financial globalization can also come with crises and contagion. The net effect of financial globalization is likely positive in the long run, with risks being more prevalent right after countries liberalize. So far, only some countries, sectors, and firms have taken advantage of globalization. As financial systems turn global, governments lose policy instruments, so there is an increasing scope for some form of international financial policy cooperation.
For capital market liberalization in developing countries, the returns have been difficult to identify: there is no convincing empirical evidence linking open capital markets to economic growth. There is however, considerable evidence of increased risk. Capital market liberalization increases consumption volatility and heightens countries’ vulnerability to crises.
In this paper we make a contribution to this debate by considering several fundamental questions: What are the appropriate boundaries for the agenda of the WTO? What would constitute a “fair” agreement? What are the characteristics of a “fair” negotiating process? There are no universal answers to these questions, but there are answers that derive legitimacy from commonly agreed values implemented in a democratic process. This paper presents a set of values with a Rawlsian flavor, which we believe is consistent with the development focus of this round and a concern for social justice. In some cases we make the implications of these principles for the outcome of the negotiations explicit, however in most cases we refer the reader to more detailed discussion in Stiglitz and Charlton (2004).
Slide Presentation accompanying the report presentation to both The World Trade Organization in Geneva and The Commonwealth Finance Ministers Meeting in St. Kitts. Prepared by Joseph E. Stiglitz and Andrew Charlton, with the Initiative for Policy Dialogue.
Agriculture looms large on the WTO’s agenda. It was the first substantive item listed in the work program of the Ministerial Declaration launching the Doha Round, and it was arguably at the centre of the failure at Cancun. Developing countries made it clear both before and during the Cancun meeting that progress on agriculture was their primary objective.
The following research agenda is based on issues raised during visits to Azerbaijan, Venezuela, Chile, and Nigeria concerning critical issues that they face in their policy dialogues, both internally, and with international financial institutions.