From International Coordination to a Rule-Based Monetary Regime

1\. Introduction 5 2\. Domestic Stability or International Coordination 7 3\. State Preferences and Institution Design 10 3.1 Domestic Factors 10 3.2 International Factors 12 3.3 Method 13 4\. From Non-Coordination to Direct Negotiation 14 4.1 Non-Coordination Period 14 4.2 Direct Negotiation and Country-Specific Recommendation 15 4.3 Coordination and Surveillance 17 4.4 Obstacle of Coordination 18 5\. The EU: From the EMS to the EMU 19 5.1 The Delors Report: Framing the Problem 19 5.2 The EU and Inflation Targeting 20 5.3 The EU as the a Promoter of Central Bank Independence 21 6\. The BIS and the IMF Research Department 22 6.1 The BIS 22 6.2 IMF Research Department 23 7\. The Internationalization of the Norm of Price Stability Targeting 24 7.1 World Economic Outlook: Institutionalization of the Norm of Inflation Targeting 25 8\. Analysis and Conclusion 26 Literature 29 Appendix 34During the 1990s, a consensus consolidated among policy makers and economists worldwide regarding the desirability of very low inflation targeting. So far, this process has been explained on the basis of a domestic-functional thesis, according to which commitment to very low inflation provides local economic gains with no costs. In this paper, I present an alternative explanation, according to which the global norm of very low inflation targeting was consolidated as a political solution to the problem of exchange rate misalignment and volatility. I argue that policy makers in Germany and the US believed that convergence of monetary policies and inflation rates, in addition to liberalization of financial markets, will stabilize exchange rates without the need for direct coordination. The paper employs the theory of liberal intergovernmentalism as a benchmark to explain the choice of the European and the G-5/7 countries to establish a low-inflation rule-based international monetary regime. The paper concludes that the regime of very low inflation targeting was consolidated as a politically viable solution to a political problem rather than as an economic best practice. Furthermore, it concludes that the norm of very low inflation targeting was a “corer solution” that neglected the problem of exchange rate stability

Localizing European and developmental central banking ideas

1\. Introduction 5 2\. The Life Cycle of an Alternative Policy Norm 7 3\. Competing Central Banking Norms 10 4\. Methodology 12 5\. The European Regional Norm Internationalized 12 6\. The Latin American Origin of the Developmental Norm of Central Banking 15 6.1 Uploading the Latin American Norm 15 6.2 Downloading to the Asian Region 17 7\. Internationalization of an Alternative Norm 18 8\. Regional Institutions in Asia 20 9\. The Demise of the Developmental Monetary Norm 22 10\. Conclusion 23 Literature 25During the 20th century, the institution called central bank was diffused globally. However, central banking practices differed significantly between European market-based economies and developing economies. This paper traces the ideas and norms that shaped and legitimized central banking practices in the two areas. The paper argues that during the period from the 1940s to the 1970s two central banking policy norms existed: the liberal norm, which emerged in Europe, and the developmental central banking norm, which emerged in Latin America and diffused to East Asia. The paper seeks to trace the life cycles of the two norms: to specify the ideational content of each norm and to identify the actors and networks that produced, promoted and diffused them. The paper makes two contributions. First, theoretically, on the basis of Finnemore and Sikkink’s theory of international norms’ dynamics, it introduces a mechanism that explains the emergence and internationalization of an alternative international norm in the periphery that challenges the standard international norm. Second, it contributes to the literature on comparative regionalism by historicizing the liberal/European standard of central banking practices and by identifying the existence of an alternative standard for central banking practices in developing countries. The paper covers the period from the 1940s to the 1970s

The consolidation of the Anglo-Saxon/European consensus on price stability: from international coordination to a rule-based monetary regime

During the 1990s, a consensus consolidated among policy makers and economists worldwide regarding the desirability of very low inflation targeting. So far, this process has been explained on the basis of a domestic-functional thesis, according to which commitment to very low inflation provides local economic gains with no costs. In this paper, I present an alternative explanation, according to which the global norm of very low inflation targeting was consolidated as a political solution to the problem of exchange rate misalignment and volatility. I argue that policy makers in Germany and the US believed that convergence of monetary policies and inflation rates, in addition to liberalization of financial markets, will stabilize exchange rates without the need for direct coordination. The paper employs the theory of liberal intergovernmentalism as a benchmark to explain the choice of the European and the G-5/7 countries to establish a low-inflation rule-based international monetary regime. The paper concludes that the regime of very low inflation targeting was consolidated as a politically viable solution to a political problem rather than as an economic best practice. Furthermore, it concludes that the norm of very low inflation targeting was a “corer solution” that neglected the problem of exchange rate stability

The life cycles of competing policy norms: localizing European and developmental central banking ideas

During the 20th century, the institution called central bank was diffused globally. However, central banking practices differed significantly between European market-based economies and developing economies. This paper traces the ideas and norms that shaped and legitimized central banking practices in the two areas. The paper argues that during the period from the 1940s to the 1970s two central banking policy norms existed: the liberal norm, which emerged in Europe, and the developmental central banking norm, which emerged in Latin America and diffused to East Asia. The paper seeks to trace the life cycles of the two norms: to specify the ideational content of each norm and to identify the actors and networks that produced, promoted and diffused them. The paper makes two contributions. First, theoretically, on the basis of Finnemore and Sikkink’s theory of international norms’ dynamics, it introduces a mechanism that explains the emergence and internationalization of an alternative international norm in the periphery that challenges the standard international norm. Second, it contributes to the literature on comparative regionalism by historicizing the liberal/European standard of central banking practices and by identifying the existence of an alternative standard for central banking practices in developing countries. The paper covers the period from the 1940s to the 1970s

The territorial logic of an export-led growth strategy: Israel's regime change after the Second Intifada

In recent decades, neo-mercantilism has become ubiquitous among small and large states. The conventional explanation for the appeal of an export-led growth regime has focused on the material interests of domestic growth coalitions. This article offers an alternative explanation for transition to export-led growth strategies, based on the geopolitical and territorial interests of states. It posits that states embrace a mercantilist export-led growth model because it aligns with their geopolitical objectives. The article demonstrates the geopolitical hypothesis based on the transition of Israel from a consumption-led to an export-led growth strategy after the end of the peace process and the outbreak of the Second Intifada in 2000

Export-led growth and the geopolitical hypothesis: Israel's regime change after the second Intifada

In recent decades, neo-mercantilism has become a fashionable trend. The appeal of an export-led growth regime is often explained based on the material interests of the domestic growth coalition. This article offers an alternative explanation based on the geopolitical territorial interests of the state. It argues that states may endorse an export-led growth model not because of the demands of social groups but because the political elite believes a neo-mercantilist strategy is more consistent with the state's geopolitical preferences. The article defines this claim as the geopolitical hypothesis of regime change. The geopolitical hypothesis does not imply that social groups are irrelevant to the process. Social groups, the article argues, can play the role of ex-ante transformative actors or of ex-post stabilizing actors. Whereas society-centered theories underline the ex-ante transformative role of social groups, the geopolitical hypothesis argues that social groups can also play an ex-post stabilizing role. Based on the case of Israel, the article argues that during the early 2000s, after the outbreak of the second Intifada, Israel shifted from a consumption-led growth regime to an export-led growth regime. The transition, the article argues, was driven by the hawkish political elite, which prioritized nationalist objectives associated with the continuation and expansion of the occupation. The article concludes by arguing that the case of Israel is exemplary and not unique and that the geopolitical hypothesis can explain the adoption of export-led growth models in other cases

Israel’s Neoliberal Turn and its National Security Paradigm

Since the early 2000s, Israel has adhered to a particularly virulent strain of economic neoliberalism which has led to an unprecedented rise in nationwide levels of poverty and inequality. Attempts to explain this phenomenon have ignored a key aspect: The need of Israel – and especially its right-wing governments – to create an economic reality that reduces the pressure Israel faces from the international community in the wake of its continued occupation of the territories