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Barry Eichengreen

Barry Eichengreen is George C. Pardee and Helen N. Pardee Professor of Economics and Political Science at the University of California, Berkeley. He is the author of Capital Flows and Crises (MIT Press, 2002) and other books.

Titles by This Author

In Global Imbalances and the Lessons of Bretton Woods, Barry Eichengreen takes issue with the argument that today's international financial system is largely analogous to the Bretton Woods System of the period 1958 to 1973. Then, as now, it has been argued, the United States ran balance of payment deficits, provided international reserves to other countries, and acted as export market of last resort for the rest of the world. Then, as now, the story continues, other countries were reluctant to revalue their currencies for fear of seeing their export-led growth slow and suffering capital losses on their foreign reserves. Eichengreen argues in response that the power of historical analogy lies not just in finding parallels but in highlighting differences, and he finds important differences in the structure of the world economy today. Such differences, he concludes, mean that the current constellation of exchange rates and payments imbalances is unlikely to last as long as the original Bretton Woods System.Two of the most salient differences are the twin deficits and low savings rate of the United States, which do not augur well for the sustainability of the country's international position. Such differences, he concludes, mean that the current constellation of exchange rates and payments imbalances is unlikely to last as long as the original Bretton Woods System.After identifying these differences, Eichengreen looks in detail at the Gold Pool, the mechanism through which European central banks sought to support the dollar in the 1960s. He shows that the Pool was fragile and short lived, which does not bode well for collective efforts on the part of Asian central banks to restrain reserve diversification and support the dollar today. He studies Japan's exit from its dollar peg in 1971, drawing lessons for China's transition to greater exchange rate flexibility. And he considers the history of reserve currency competition, asking if it has lessons for whether the dollar is destined to lose its standing as preeminent international currency to the euro or even the Chinese renminbi.

The implications of capital mobility for growth and stability are some of the most contentious and least understood contemporary issues in economics. In this book, Barry Eichengreen discusses historical, theoretical, empirical, and policy aspects of the effects, both positive and negative, of capital flows. He focuses on the connections between capital flows and crises as well as on those between capital flows and growth.

Eichengreen argues that international financial liberalization, like other forms of economic liberalization, can positively affect the efficiency of resource allocation and the rate of economic growth. But analyses of both recent and historical experience also show an undeniable association between capital mobility and crises, especially when domestic institutions are weak and the harmonization of capital account liberalization and other policy reforms is inadequate. In his conclusion, Eichengreen makes suggestions for policy design to maximize the benefits of international financial liberalization while minimizing the risks of financial instability.

Theory, Practice, and Analysis

The process of European monetary unification (EMU) is approaching a critical juncture. At the beginning of 1998 the member states of the European Union will decide whether or not to go ahead with their monetary union and determine which countries qualify as members. There is a high likelihood that Stage III of the Maastricht process—monetary union itself—will commence on January 1, 1999, and that a single currency, to be known as the Euro, will replace the national currencies of the founding member states at the beginning of 2002. Even if it is delayed, Stage III is likely to go forward soon thereafter.

Whether EMU is feasible and desirable is contested among economists and politicians alike. This book sheds light on the controversy by considering seven major aspects: (1) what the theory of optimum currency areas reveals about the EMU project, (2) how Europe compares with existing monetary unions such as the United States, (3) the crisis in the European monetary system and the feasibility of stabilizing exchange rates in the absence of monetary unification, (4) fiscal policy and EMU, (5) labor markets and EMU, (6) the connections between monetary and political union, and (7) EMU and the rest of the world.

The author views EMU as neither a grand achievement nor a terrible blunder, but as a process. He argues that the effects of monetary unification will depend on how it is structured and governed, and how quickly Europe's markets adapt to a single currency. The process of monetary unification will not end in 1999 or 2002; rather, the structure and operation of Europe's monetary union will continue to evolve for years to come.

 

This anatomy of financial crises shows that the worldwide debt crisis of the 1980s was not unprecedented and was even forecast by many. Eichengreen and Lindert bring together original studies that assess the historical record to see what lessons can be learned for resolving today's crisis.

"Me International Debt Crisis in Historical Perspective] demonstrates effectively how the historical perspective can help us understand the nature of international debt crises with particular recurring features such as reckless borrowing, excessive optimism of lenders, and the failure to recognize the time dimension in economic development... This stimulating volume shows the value of the historical perspective for policymakers, lenders, and borrowers when appraising foreign investment possibilities, dangers, and pitfalls. The future is not always like the past, but resembles it often enough for the past to be a relevant consideration. " - A. G. Ford, Economic History Review

Titles by This Editor

On the Verge of a Big Bang?

Developing local bond markets is high on the policy agenda of Latin America. Bond markets are an essential component of a well-functioning financial market. Facilitating the efforts of public and private borrowers to issue domestic-currency-denominated, long-term, fixed-rate bonds insulates them from the rollover and balance sheet risks that have been central elements in past financial crises. In addition, a robust bond market is a way for nonfinancial firms to retain their capacity to borrow when the banking system grows reluctant to lend. Latin American bond markets are growing, and may even approach a “big bang”-like surge, although significant challenges remain. This first comprehensive examination of the importance of local bond market development in Latin America provides conceptual and comparative assessments, case studies of six countries, surveys of firms and investors, and a cross-country economic analysis of the determinants of bond market development. The book’s case studies of Argentina, Brazil, Chile, Colombia, Mexico, and Uruguay, written by country experts, follow a common methodology, with each offering a history of that country’s bond market development, a comprehensive and unique data set on both private and public bond markets, surveys of firms and investors, and (in many chapters) firm-level analysis. A Web appendix makes available the unique data sets, including results of specially designed surveys of firms and investors participants, used in the book’s studies. Eduardo Borensztein is an Advisor, Research Department, at the International Monetary Fund. Kevin Cowan is a Senior Economist, Financial Stability Division, at the Central Bank of Chile. Barry Eichengreen is George C. Pardee and Helen N. Pardee Professor of Economics and Political Science at the University of California, Berkeley, and the author of Global Imbalances and the Lessons of Bretton Woods (MIT Press, 2006) and other books. Ugo Panizza is Chief of the Debt and Finance Analysis Unit in the Division on Globalization and Development Strategies at the United Nations Conference on Trade and Development.ContributorsCamila Aguilar, Patrick Bolton, Eduardo Borensztein, Matías Braun, Ignacio Briones, Mauricio Cárdenas, Andre L. Carvalhal da Silva, Sara G. Castellanos, Kevin Cowan, Julio de Brun, Barry Eichengreen, Roque B. Fernández, Xavier Freixas, Néstor Gandelman, Herman Kamil, Ricardo P. C. Leal, Lorenza Martínez, Marcela Meléndez, Ugo Panizza, Sergio Pernice, Arturo C. Porzecanski, Natalia Salazar, Jorge Streb

This anatomy of financial crises shows that the worldwide debt crisis of the 1980s was not unprecedented and was even forecast by many. Eichengreen and Lindert bring together original studies that assess the historical record to see what lessons can be learned for resolving today's crisis.

"Me International Debt Crisis in Historical Perspective] demonstrates effectively how the historical perspective can help us understand the nature of international debt crises with particular recurring features such as reckless borrowing, excessive optimism of lenders, and the failure to recognize the time dimension in economic development... This stimulating volume shows the value of the historical perspective for policymakers, lenders, and borrowers when appraising foreign investment possibilities, dangers, and pitfalls. The future is not always like the past, but resembles it often enough for the past to be a relevant consideration. " - A. G. Ford, Economic History Review