The Uses and Abuses of the Euro in the Canadian Currency Debate. Jean Monnet/Robert Schuman Paper Series, Vol. 3 No. 3, August 2003

(From the introduction). In the late 1990s, some prominent Canadian economists – notably Thomas Courchene, Herbert Grubel, Richard Harris, and Robert Mundell – began arguing that a North American common currency would solve the problems underlying the growing gap between U.S. and Canadian real GDP per capita.1 They succeeded in provoking a lively economic policy debate that occurred in parallel with the launch of the euro. The purpose of this paper is to examine the uses – and abuses – of European parallels by both sides in the economic policy debate that peaked in the 1999-2001 period. The body of the paper begins by providing an understanding of the European case. Hence, the second section outlines our interpretation of the major developments in the birth of the euro. The third section, the core of the paper, examines in detail the use of European parallels in the Canadian currency debate. We start by providing a brief overview of the protagonists in the debate. We then continue by arguing that the euro provided a “temporal spur” for the Canadian discussion but that it was only one among several important factors. We argue further that the proponents of a North American common currency relied very little on the European experience to support their case for the need for a common currency. Where they did use the European experience, however, was in their analysis of the institutional form that a common currency in North America might take. We argue that the opponents of a North American common currency were correct in viewing this as an abuse of the European parallel. In the concluding fourth section, we summarize our findings and argue that the most important parallel between the European and North American forces for a common currency is that both were driven primarily by politics

An Analysis of Basel III as a Prophylactic

The aim of this research is twofold. The first is to gauge the efficacy of Basel III which is the Basel Committee on Banking Supervision’s response to the global financial crisis that broke out in the summer of 2007, while the second is the examination of the role of law in crisis. The Basel Committee on Banking Supervision is the international agency tasked with standard setting for internationally active banks and within this remit is the charge to position these banks to withstand crisis and possibly forestall the outbreak or spread of crisis. One the other hand, the concept of law serves as an original, self-creating justification for regulating human conduct. Law has a number of unique features that may benefit international banking regulation. As the global community becomes ever smaller and systemic risk continues to plague the already heavily interconnected global financial system, these investigations are important to ensure the growth and development benefits of a stable global financial and economic system are enhanced. To meet this aim, this research investigates the doctrine behind the way law is used to check crisis. Since the primary reason for the accord in the global financial crisis and crisis represents crash in a financial system, hence inefficiency, the research pairs law with economics to determine whether efficiency is to be had in the present state. The data relied upon is secondary data from the extensive literature that exists on each of the subject matters. In the end, the research findings are that Basel III is an improvement on Base II but may be plagued by implementation issues like its predecessors and that the is a likelihood of another financial crises and the BCBS is doomed to be reactionary rather that preventive. Also, lacking the coercive quality of law, international financial regulation is in a porous state and may benefit from conceptual and structural changes

The new resilience of emerging and developing countries: systemic interlocking, currency swaps and geoeconomics

The vulnerability/resilience nexus that defined the interaction between advanced and developing economies in the post-WWII era is undergoing a fundamental transformation. Yet, most of the debate in the current literature is focusing on the structural constraints faced by the Emerging and Developing Countries (EDCs) and the lack of changes in the formal structures of global economic governance. This paper challenges this literature and its conclusions by focusing on the new conditions of systemic interlocking between advanced and emerging economies, and by analysing how large EDCs have built and are strengthening their economic resilience. We find that a significant redistribution of ‘policy space’ between advanced and emerging economies have taken place in the global economy. We also find that a number of seemingly technical currency swap agreements among EDCs have set in motion changes in the very structure of global trade and finance. These developments do not signify the end of EDCs’ vulnerability towards advanced economies. They signify however that the economic and geoeconomic implications of this vulnerability have changed in ways that constrain the options available to advanced economies and pose new challenges for the post-WWII economic order

Who\u27s in Charge of Global Finance?

The global financial crisis caused widespread harm not just to the financial system, but also to millions of households and businesses and to the global economy. The crisis revealed substantive, fundamental weaknesses in global financial regulation and raised serious questions about whether national regulators and the international financial regulatory system could ever be up to the task of overseeing global finance. This Article analyzes post-crisis reforms with two questions in mind: First, how can we build an effective international financial architecture with more than one architect? Second, can we build a system that is legitimate and accountable? The Article suggests areas for further substantive and procedural reform

The Limits of Incrementalism: The G20, the FSB, and the International Regulatory Agenda

At their very first summit in Washington in November 2008, the G20 leaders placed the reform of international financial regulation at the core of their agenda. The issue has retained a central place in discussions and communiqués at every subsequent meeting. It has been remarkable to see heads of state commit such detailed attention in their communiqués to a topic which has historically been the more obscure preserve of technocratic officials. Equally striking has been the fact that policymakers have looked beyond the immediate task of managing the crisis to focus on this more forward-looking agenda to prevent future crises. It took more than a decade after the crisis of the early 1930s for political leaders to agree at the 1944 Bretton Woods conference on international financial reforms designed to prevent a repetition of that economic calamity. This time around, the crisis has been used as an immediate catalyst for reform. But what have the G20 leaders actually accomplished so far in this field? There is no question that they have successfully negotiated more initiatives in this area than in any other, initiatives that are aimed at reforming both the content and the governance of international financial regulation. While the breadth of these reforms has been impressive, they also suffer from some important limitations. Despite the scale of the crisis, the reforms have been much more incremental than radical. Their implementation has also been slow and uneven, and some important issues have been neglected entirely. As we have entered a new phase of financial instability unleashed by the eurozone’s difficulties, these limitations have become increasingly evident, with political consequences that are very difficult to predict

Sovereign Debt Restructuring: A Model-Law Approach

The existing contractual framework for sovereign debt restructuring is sorely inadequate. Whether or not their fault, nations sometimes take on debt burdens that become unsustainable. Until resolved, the resulting sovereign debt problem hurts not only those nations (such as Greece) but also their citizens, their creditors, and—by posing serious systemic risks to the international financial system—the wider economic community. The existing contractual framework functions poorly to resolve the problem because it often leaves little alternative between a sovereign debt bailout, which is costly and creates moral hazard, and a default, which raises the specter of systemic financial contagion. Most observers therefore want to strengthen the legal framework for resolving sovereign debt problems. International organizations, including the United Nations, have been contemplating strengthening that framework through treaties. The political economy of treaty-making, however, makes that approach highly unlikely to succeed in the near future. This article argues, in contrast, that a model-law approach should not only strengthen that legal framework but also should be politically and economically feasible. Model laws have long been used in cross-border lawmaking, but they are different than treaties. Unlike a treaty, a model law would not require general acceptance for its implementation. Only one or two jurisdictions, for example, need enact the text of this article’s proposed model law for it to become widely effective. Once that occurs, a debtor-state whose debt contracts are governed by those jurisdictions’ laws, or by its own laws, could restructure that debt without needing to amend any of those contracts. A model-law approach should also be desirable. This article’s model law, for example, would reduce uncertainty and should also achieve significant cost advantages—both to debtor-states and to their creditors—over the sovereign-debt-restructuring status quo. Because it would require only a ministerial supervisory process, the model law would not interfere with the exercise of a sovereign’s political discretion. Moreover, the model law provides incentives to motivate fair bargaining on behalf of debtor-states and their creditors, while restricting rent-seeking holdouts. It also enables the type of interim funding of day-to-day debts that a debtor-state needs during its debt restructuring. Debtor-states should therefore want (and creditors, other than rent-seeking holdouts, should want them) to enact into law this article’s proposed model-law text. Regardless of whether that enactment occurs, however, the article should serve its underlying purpose: to provide a conceptual and legal analysis of how a model law could be structured and how a model-law approach could be used to solve the problem of unsustainable sovereign debt burdens, and to help develop the norms required to facilitate those goals

Between Confrontation and Assimilation: China and the Fragmentation of Global Financial Governance

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