Paradigm shift? A critique of the IMF’s new approach to capital controls

The global financial crisis forcefully highlighted the importance of developing mechanisms to curb the effects of large and volatile capital inflows on growth and financial stability in developing countries. It led the IMF to reconsider its long-standing rejection of capital controls. This paper explores the analytical framework underlying the IMF’s new position, arguing that its sequencing strategy offers a formulaic solution that neglects the institutional make-up of money and currency markets, is asymmetric in its emphasis on the upturn of the liquidity cycle and sanctions capital-controls only as a last-resort solution. The new approach can have perverse impacts, increasing vulnerability where banks play an important role in the intermediation of capital inflows. The paper offers alternative policy solutions that focus on realigning bank incentives towards longer horizons and sustainable growth models, combining carefully designed central bank liquidity strategies and institutional changes in the banking sector.IMF, capital controls, financial crisis, global liquidity, shadow banks, sterilizations, central banks.

Critical macro-finance: A theoretical lens

This forum contribution outlines four propositions of the critical macro-finance approach: (1) US-led financial globalization has structurally evolved around market-based finance, driven by the production of new asset classes and the Americanization of national financial systems with changing practices for producing liquidity; (2) global finance is a set of interconnected, hierarchical balance sheets, increasingly subject to time-critical liquidity; (3) credit creation in market-based finance involves new forms of money (systemic liabilities); and (4) market-based finance structurally requires a derisking state, for both systemic liabilities and for new asset classes. The precise contours of the derisking state are determined through political struggles

Monetary Policy Processes in Postcommunist Romania

This thesis has a twofold aim. It first argues that monetary policy is inherently political because it involves struggles over meaning. It modifies Niebyl’s (1946) conceptual approach with an explicit attention to meaning, advancing a theory/ policy discourse/institutional practices nexus for exploring central banking. It shows that the emergence of leading representations of monetary processes (in Ricardo, Keynes and Friedman) involved discursive struggles during periods of crisis to assign meaning to problems and establish dominant interpretations. Politics and power were not grafted onto policy but were ontologically constitutive of it, shaping specific institutional configurations and practices. Second, this conceptualization is taken to a case study: a critical scrutiny of the role played by the central bank of Romania (NBR) in the reconstitution of the postcommunist Romanian economy as neoliberal economy from 1990 to 2008. The thesis asks what does the central bank do when the state, defined through its central planning legacy, ‘retreats’ from the market? The usual account explains policy success as direct result of commitments to neoliberal (monetarist) principles prescribed by international policy advice. Before 1997, neocommunist governments politically validated a communist legacy: soft budget constraints in the (state) productive sector. Politicized monetary policy decisions produced repeated crises. Afterwards, neoliberal governments gradually institutionalized an autonomous economic sphere, allowing an objective formulation and implementation of stability-orientated monetarist policies. The thesis challenges this orthodoxy. It argues against the attempts to erase politics from monetary policy processes that the above account articulates. Instead, drawing on critical conceptualizations of neoliberalism in its shifting forms, the period under analysis will be (re)interpreted as an ongoing process of neoliberalization, with the central bank an important actor in it. Indeed, the narration of crises identified the NBR as an essential instrument of institutional change and neoliberal ‘policy-making’. Monetarist narratives (ideologically) legitimized neoliberalism and effectively enacted neoliberal principles of monetary governance in the central bank. Thus, before 1997, the central bank functioned as a key vehicle of the neoliberal attack on the state’s capacity to craft economic reform. Since neoliberal institutions (also) take time to build, expanding policy repertoires outside the monetarist range invested the central bank with increasing powers to respond to structural and institutional resistance to neoliberal logics, arising from both communist legacies and ongoing political struggles. After 1997, the central bank’s rationality gradually changed to a constructive phase, normalizing an extralocal mode of economic governance whose distinguishing features will be identified. Institutional practices reconstructed the relationship between money, foreign exchange and treasury markets, subjugating liquidity management to the requirements of financialized accumulation. With financial stability increasingly tied into transnational actors’ choices, the NBR adopted inflation targeting. Nevertheless, inflation-targeting’s promise of stability operated to sideline the destabilizing nature of normalized neoliberal practices of monetary management, clearly evoked by the 2008 crisis. The thesis concludes with policy implications and an agenda for future research

The Application of Main Component Analysis Method on Indicators of Romanian National Authority for Consumers Protection Activities

The National Authority for Consumers Protection, Romania (NACP Romania) is the institution which records various trends from one development region to another as well as from one county to another. The indicators of NACP Romania activities are firmly correlated with other important macroeconomic indicators, even at the level of Romanian counties, hypothesis verified by the authors in a previous research. (Stefanescu & Gabor, 2008) The paper tests the hypothesis that in the last decade there have been numerous structural changes regarding the economic indicators at county level and we will analyze the evolution of these structural changes in two different periods, respectively year 2000 and 2006, and especially the clustering of Romanian counties, taking into account the macroeconomic indicators and those recorded by NACP Romania, using a descriptive method of data analysis, the principal component analysis (PCA). By applying the PCA method, we can obtain useful information for NACP that, according to its specific tasks, cooperates with local government authorities regarding the development of consumer education strategy and the organization of control activities. In this regard, depending on the level of economic development of each county, the consumption characteristics of the population, the earnings level, as well as the GDP per capita, the NACP can develop differentiated strategies, adapted to the features of each county.The National Authority for Consumers Protection from Romania, principal component analysis, macroeconomic indicators, counties, correlation

The state, inequality and the politics of economic ideas: three blind spots in shadow banking

Despite systemic risks, the international regulatory regime seems to be returning to a benign view of financial innovation, write Cornel Ban and Daniela Gabo

Three Ideas to Improve the International Role of the ECB

The ECB has been forced - in part by the COVID-19 crisis - to review its bilateral arrangements with foreign central banks. But the recent changes made by the ECB fall short of the European Commission’s ambitions to boost the international role of the euro. We suggest the ECB should put in place an alternative three-pillar framework to improve the international role of the ECB and cement its pivotal role in the international financial system

The digital revolution in financial inclusion: international development in the fintech era

© 2016 Informa UK Limited, trading as Taylor & Francis Group. This paper examines the growing importance of digital-based financial inclusion as a form of organising development interventions through networks of state institutions, international development organisations, philanthropic investment and fintech companies. The fintech–philanthropy–development complex generates digital ecosystems that map, expand and monetise digital footprints. Its ‘know thy (irrational) customer’ vision combines behavioural economics with predictive algorithms to accelerate access to, and monitor engagement with, finance. The digital revolution adds new layers to the material cultures of financial(ised) inclusion, offering the state new ways of expanding the inclusion of the ‘legible’, and global finance new forms of ‘profiling’ poor households into generators of financial assets

The Application of Main Component Analysis Method on Indicators of Romanian National Authority for Consumers Protection Activities

The National Authority for Consumers Protection, Romania (NACP Romania) is the institution which records various trends from one development region to another as well as from one county to another. The indicators of NACP Romania activities are firmly correlated with other important macroeconomic indicators, even at the level of Romanian counties, hypothesis verified by the authors in a previous research. (Stefanescu & Gabor, 2008) The paper tests the hypothesis that in the last decade there have been numerous structural changes regarding the economic indicators at county level and we will analyze the evolution of these structural changes in two different periods, respectively year 2000 and 2006, and especially the clustering of Romanian counties, taking into account the macroeconomic indicators and those recorded by NACP Romania, using a descriptive method of data analysis, the principal component analysis (PCA). By applying the PCA method, we can obtain useful information for NACP that, according to its specific tasks, cooperates with local government authorities regarding the development of consumer education strategy and the organization of control activities. In this regard, depending on the level of economic development of each county, the consumption characteristics of the population, the earnings level, as well as the GDP per capita, the NACP can develop differentiated strategies, adapted to the features of each county