Macroeconomics

This paper sets forth a set of policies which are an alternative to the standard IMF prescriptions. It delineates the circumstances under which such policies could be easily implemented, outlines the risks, and provides a framework for thinking through how these risks can be assessed relative to the risks of the standard IMF strategies.

The European Central Bank has by and large applied the right monetary policy. Nevertheless, we argue for a range of reforms that would make the ECB more effective and accountable. We also suggest a role for the European Parliament in setting monetary policy targets. And with EU and Euro area enlargement around the corner, we propose reforms to the composition of the ECB’s policymaking council. Finally, we make the case for a thorough revamp of the Stability and Growth Pact, which strangles Europe’s economic growth.

The paper is presented in two parts. The first discusses two key issues related to the Convertibility regime established in 1991 and its final crisis in 2001. The second part analyzes the economic performance in the nineties with a focus on the effects on the labor market. One key issue refers to the policy regime and the economic performance it led to. The paper claims that the case is similar to other Latin American experiences of financial liberalization and opening that ended up in crisis.

This paper demonstrates that institutions matter for the macro-economy a great deal, and therefore that we need to explicitly incorporate institutional factors in macroeconomic theory. It draws extensively on the history of the development of institutions of macroeconomic management in today’s developed countries while Chang’s ultimate interest is the role of institutions in the macroeconomic management in developing countries.

This paper stresses the differences between the old and new varieties of financial crises in emerging economies. It examines the main features of the three financial capital surges and how capital surges have led to destabilizing cycles in the macroeconomic ecnvironment of most emerging economies. The economic and social costs of the Tequila and Asian crises are also covered.

Khor finds that the Malaysian experience shows an alternative to the IMF policy package can and does exist and that it can produce results that are at least as successful. Malaysia adapted to its own peculiar circumstances, the lesson is that countries can and should consider the use of capital controls as part of the array of policy tools available.

In this paper Nayyar demonstrates that macroeconomics developed in the context of industrialized countries cannot simply be transplanted in developed countries. Starting from accounting identities, models can be built based on economic reasoning, but such models must respect institutional facts and recognize different contexts.