Policy making in an integrated world: from surveillance to ...?

Monetary policy ; International Monetary Fund ; International finance

Exchange Rates and Economic Recovery in the 1930s

Currency depreciation in the 1930s is almost universally dismissed or condemned. It is credited with providing little if any stimulus for economic recovery in the depreciating countries and blamed for transmitting harmful beggar-thy-neighbor impulses to the rest of the world econonv. In this paper we argue for a radically different interpretation of exchange-rate policy in the 1930s . We document first that currency depreciation was beneficial for the initiating countries. It worked through both the standard supply- and demand-side channels suggested by modern variants of the Keynesian model. We show next that there can in fact be no presumption that currency depreciation inthe 1930s was beggar-thy-neighbor policy. Rather, an empirical analysis of the historical record is needed to determine whether the impact on other countries was favorable or unfavorable. We conclude provisionally on the basis of this analysis that the foreign repercussions of individual devaluations were in fact negative -that the depreciations considered were beggar-thy-neighbor. As we point out, however, this finding does not support the conclusion that competitive devaluations taken by a group of countries were without benefit for the system as a whole. We argue to the contrary that similar policies, had they been even more widely adopted, would have hastened recovery from the Great Depression.

Debt and Default in the 1930s: Causes and Consequences

This paper analyzes the "debt crisis" of the 1930s to see what light this historical experience sheds on recent difficulties in international capital markets. We first consider patterns of overseas lending and borrowing in the 1920s and 1930s, comparing the performance of standard models of foreign borrowing in this period to the 1970-80s. Next, we analyze the incidence and extent of defaulton sovereign debt, adapting models of debt capacity to the circumstances of the interwar years. We consider the choices available to investors in those foreign loans which lapsed into default in the 1930s, emphasizing the distinction between creditor banks and bond holders. Finally, we provide the first estimates of the realized rate of return on foreign loans floated between the wars, based on a sample of dollar andsterling bonds issued in the 1920s.

Between Meltdown and Moral Hazard: The International Monetary and Financial Policies of the Clinton Administration

We review and analyze the monetary and financial policies of the Clinton administration with a focus on the strong dollar policy, the Mexican rescue, the response to the Asian crisis, and the debate over reform of the international financial architecture. While we consider the role of ideas, interests and institutions in the formulation of policy, our emphasis here is on institutions, and specifically on how personnel and administrative arrangements allowed the Treasury department to exercise an unusually important influence in the development of these policies. This allowed a set of ideas imported by Treasury from academia and the markets to strongly influence the formulation of the international monetary and financial policies during the Clinton years.

The Marshall Plan: History's Most Successful Structural Adjustment Program

The post-World War II reconstruction of Western Europe was one of the greatest economic policy and foreign policy successes of this century. "Folk wisdom" assigns a major role in successful reconstruction to the Marshall Plan: the program that transferred some $13 billion to Europe in the years 1948-51. We examine the economic effects of the Marshall Plan, and find that it was not large enough to have significantly accelerated recovery by financing investment, aiding the reconstruction of damaged infrastructure, or easing commodity bottlenecks. We argue, however, that the Marshall Plan did play a major role in setting the stage for post-World War II Western Europe's rapid growth. The conditions attached to Marshall Plan aid pushed European political economy in a direction that left its post World War II "mixed economies" with more "market" and less "controls" in the mix.

U.S. Antidumping Policies: The Case of Steel

This paper examines the controversy surrounding recent allegations that foreign producers are dumping steel products onto U.S. markets. The paper is in four sections, which take four quite distinct views of dumping and recent U.S. antidumping policies, emphasizing the changing definition of dumping and the development of administrative procedures. Section II focuses on the application of these procedures to the international steel trade, taking as a case study the most noteworthy of recent innovations : the Trigger Price Mechanism for steel. Section III considers models that can be used to analyze dumping. The models of most relevance to the practices currently at issue in the steel industry seem to us models of oligopolistic rivalry in imperfectly competitive, segmented markets. We develop a model designed to identify crucial factors upon which the incidence of dumping will depend: the number of firms producing for each national market,their costs, their market shares, and the extent to which they recognizeand exploit their mutual dependence. Finally, in Section IV we calibrate these models to illustrate how the extent of dumping and the effects of the TPM depend on the model's parameters.

International Policy Coordination in Historical Perspective: A View from the Interwar Years

This paper examines the international financial relations of the interwar period to see what light this experience sheds on current concerns over international policy coordination. The analysis proceeds in three parts. The first part considers the role for policy coordination as viewed by contemporaries at the start of the period; it takes as a case study the Genoa Economic and Financial Conference of 1922. Efforts at Genoa to coordinate policies ended in failure; the second part therefore considers the effects of noncooperative strategies within the framework of the interwar gold standard. The analytical model developed in this section suggests that the failure to coordinate policies lent a deflationary bias to the world economy which may have contributed to the on set of the Great Depression. The third part asks what policymakers learned from this failure to coordinate policies, taking evidence from the next effort to establish a framework for international financial collaboration: theTripartite Monetary Agreement of 1936.