The Institutions of International Finance and
Development
IR 759
Cornel Ban
Assistant Professor
The International Relations Department
Boston University
cban@bu.edu
Professor: Cornel Ban
Office hours: TBA
How has the evolving nature of international finance constrained and/or enlarged national
sovereignty? How do states finance wars and how do insurgents fund insurgency? Do
regional organizations complement or undermine international organizations? What roles
can states still play in economic development given the constraints of global and regional
governance? Is the ongoing crisis exceptional and what should be expect to find in its
debris? Should Western finance be the only referent and what place do Islamic finance or
market-socialist finance have at the table?
This course attempts to address these questions through a tour de force of stability and
crisis in the world economy, with an emphasis on the role of public international
organizations (IMF, World Bank, regional institutions) and private ones (globalized
financial institutions and stocks of exchange, central banks, credit rating agencies,
epistemic communities, a wide diversity of private financial institutions). While some of
the readings cover historical developments, the main focus remains on developments
from the past two decades, with the current crisis being reserved a prominent role.
While the main objective of the class is to give you a sophisticated perspective on the
main questions posed above, it also aims to endow you with concrete skills used in
policy: assuming opposing views in debates, translating research findings for nonspecialist audiences, writing in policy formats (press releases, policy memoranda, op-ed
pieces etc.).
The readings used in the class were intended for a general audience, rather than a
specialist readership endowed with heavy training in economics.
Course guidelines
The course format is as follows: (a) the professor will deliver a short lecture, framing the
issues of the day in the broader context of the class. (b) next, specific students present the
assigned readings and draw the rest of the class into a debate that is germane to the main
issues highlighted in the readings (c) after the break, the professor will deliver an
interactive lecture focused on relevant aspects not discussed in the readings.
By February 30th, each of you owes a 2,000 words literature review on a relevant issue to
be decided together with the instructor. The final paper consists of a 4,000 words paper
addressing a policy question that is high on the current policy agenda. The format is not
the academic paper but the policy memorandum.
Special note: The format of the seminar emphasizes discussions and therefore there is no
need to use laptops, ipads and iphones following the professor’s lecture. You can use
handwritten notes at any time, however.
Grading policy
Each of the literature review essays will be worth 20 points of the final grade, while the
final paper will be worth 40 points. The remaining 20 points will be covered in the
following way: 10 points for class participation and 10 points for an editorial/letter to the
editor prepared for Financial Times on one of the issues discussed in class to be delivered
at any point before the end of the class, along with evidence of its submission (forward
the letter to the professor).
To keep up to speed with the latest research on hot topics in economics and political
economy you are strongly encouraged to keep an eye on the following blogs:
http://www.voxeu.org/
http://triplecrisis.com/
http://ineteconomics.org/blog
http://blog-imfdirect.imf.org/
http://nakedkeynesianism.blogspot.com/
http://www.project-syndicate.org/
http://baselinescenario.com/
http://www.guardian.co.uk/global-development
http://chrisblattman.com/
The daily reading of Financial Times is highly recommended
Work and Ethics
You are responsible to know Boston University’s Academic Conduct Code. Link:
http://www.bu.edu/academics/resources/academic-conduct-code/
Books
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Eric Helleiner States and the Reemergence of Global Finance: From Bretton Woods to
the 1990s, Cornell University Press, 1996
Barry Eichengreen, Globalizing Finance: A History of the International Monetary
System, Princeton University Press, 2nd edition, 2008
Joseph P. Joyce, The IMF and Global Financial Crises: Phoenix Rising? Cambridge
University Press, 2012
Mark Blyth, Austerity: The History of a Dangerous Idea, Oxford University Press, 2013
William Janeway, Doing Capitalism: Capitalism in the Innovation Economy, Oxford
University Press, 2012, part 3
Session 1. Introduction
Eichengreen, Globalizing Capital, ch 1
Helleiner, States and the reemergence of global finance, ch. 1
Richard Deeg and Mary O’Sullivan, “The Political Economy of Global Finance Capital”
World Politics, 2009, Vol.61(4), pp.731-763
Mark Blyth, Austerity: The History of a Dangerous Idea, Oxford University Press, 2013, ch.
1
Andrew Haldane and Robert May, “The birds and the bees, and the big banks” Financial
Times, February 20, 2011
Fun stuff:
Nassib Taleb, “Antifragility” http://www.youtube.com/watch?v=7IpTpjhVo7I
http://www.guardian.co.uk/books/2012/nov/21/antifragile-how-to-live-nassim-nicholastaleb-review
Watch this documentary
http://www.pbs.org/wgbh/pages/frontline/meltdown/view/
Session 2. Economic Development: The Main Frameworks
Dani Rodrik, “Goodbye Washington Consensus, Hello Washington Confusion? A
Review of the World Bank’s Economic Growth in the 1990s” Journal of Economic
Literature, 2006.
Robert Wade “Beware of what you wish for: Lessons for international political economy
3
from the transformation of economics” Review of International Political Economy, 16,1,
2009.
Justin Lin and Ha Joon Chang “Should Industrial Policy in developing Countries
Conform to Comparative Advantage or Defy it?” Development Policy Review, 2009.
Penelope Prime “Utilizing FDI to Stay Ahead: The Case of Singapore” Studies in
Comparative International Development” 47, 2, 2012.
Arturo Escobar, “Beyond the search for a paradigm? Post-development and beyond”
Development, 43, 4, 2000.
Session 3. Capitalist Development and International Finance: From the Gold
Standard to Interwar Instability
Eichengreen, Globalizing Capital, ch. 2-3
Mark Blyth, Austerity: The History of a Dangerous Idea, Oxford University Press, 2013, ch.
5
Session 4. Financing the Economy during the Bretton Woods Era: From Wall Street
to Vietnam War Finance
Eric Helleiner States and the reemergence of global finance, part. 2
Eichengreen, Globalizing Capital, ch. 4
William Janeway, Doing Capitalism: Capitalism in the Innovation Economy, Oxford
University Press, 2012, ch. 2
Mark Blyth, Great Transformations, Cambridge University Press, 2002, ch 3
Session 5. Financing the Economy after the Bretton Woods Era: From Wall Street
to Insurgency Finance
Eric Helleiner States and the reemergence of global finance, part. 2
Eichengreen, Globalizing Capital, ch. 5
Eric Helleiner and Stefano Pagliari “Towards a New Bretton Woods? The First G20
Leaders Summit and the Regulation of Global Finance”, New Political Economy, Vol. 14,
No. 2, June 2009
William Janeway, Doing Capitalism: Capitalism in the Innovation Economy, Oxford
University Press, 2012, part 1
4
Graham Myres, “Investing in the Market of Violence: Toward a Micro-Theory of
Terrorist Financing” Studies in Conflict & Terrorism, Volume 35, Issue 10, 2012
Fun stuff:
Michael Lewis, “Wall Street on the Tundra,” Vanity Fair (Apr. 2009) at
http://www.vanityfair.com/politics/features/2009/04/iceland200904
Session 6: Why and how financial crises occur
Charles Kindleberger, “Anatomy of a Typical Crisis,” Manias, Panics, and Crises, New
York, Wiley 1987/2011
Reinhart and Rogoff “This Time it’s Different” NBER 13882, Available at
http://www.nber.org/papers/w13882
Hyman Minsky, Stabilizing and Unstable Economy, McGraw-Hill, 2008. Ch1-2 and
conclusions
Mark Blyth, Austerity: The History of a Dangerous Idea, Oxford University Press, 2013, ch.
2-3
Philip Arestis and Ajit Singh, “Financial globalisation and crisis, institutional
transformation and equity” Cambridge Journal of Economics, (2010) 34 (2): 225-238.
Optional:
Randall Wray “Minsky, the Global Financial Crisis and the Prospects Before Us”
Development 52, 2009, pp 302-307.
Michael Lewis on The Blow up and AIG
http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-ofWall-Streets-Boom
Blyth on Bouncy castle finance
http://www.foreignpolicy.com/articles/2009/09/14/bouncy_castle_finance
Brunnermeier, M. (2009). “Deciphering the Liquidity and Credit Crunch 2007-08,”
Journal of Economic Perspectives, 23, 77-100.
Joe Nocera on value at risk analysis, http://www.nytimes.com/2009/01/04/magazine/04riskt.html
Felix's Salmon's piece on the Gaussian Cupola,
http://www.wired.com/techbiz/it/magazine/17-03/wp_quant?currentPage=all
5
Matt Taibbi on Goldman Sachs
http://www.rollingstone.com/politics/story/29127316/the_great_american_bubble_machine
Session 7: Governing Financial Crises (I)
Joseph P. Joyce, The IMF and Global Financial Crises: Phoenix Rising? Cambridge
University Press, 2012 (first half)
Liam Clegg “Global governance behind closed doors: The IMF boardroom, the enhanced
structural adjustment facility and the intersection of material power and norm
stabilization in global politics” Review of International Organizations, 7 (3) 2012.
Optional:
Dawn Holland, Jonathan Portes, 1 November 2012, Gauging the multiplier: Lessons from
history
Session 8: Governing Financial Crises (II)
Joseph P. Joyce, The IMF and Global Financial Crises: Phoenix Rising? Cambridge
University Press, 2012 (second half)
Andre Broome, Liam Clegg and Lena Rethel “Global Governance and the Politics of
Crisis” Global Society, 31 Jan 2012
Financial Times Alpha Ville (2010), Basel III has landed: Full details!”
http://ftalphaville.ft.com/blog/2010/09/12/340356/basel-iii-has-landed-full-details/
Fun stuff
Warwick Commission Report, at
www2.warwick.ac.uk/research/warwickcommission/.../report/
Andrew G Haldane, “What have the economists ever done for us?”, www.voxeu.org, 1
October 2012
Mosley, Layna (2010), Regulating globally, implementing locally:
The financial codes
and standards effort,” Review of International Political Economy, 17:4 October 2010:
724–761
Helleiner, Eric and Stephano Pagliari (2010), “The End of Self-Regulation? Hedge Funds
and Derivatives in Global Financial Governance,” Helleiner, et al, Global Finance In
Crisis, London Routlege.
Session 9: Money, Trade Imbalances, Innovation and Development
6
Leonardo Baccini and Soo Yeon Kim “Preventing protectionism” International
institutions and trade policy” Review of International Organizations, 7 (4) December
2012
Robert Wade, “From global imbalances to global reorganizations” Cambridge Journal of
Economics, 33, 4, 2009
Daniela Gabor and Cornel Ban, “Fiscal Policy in Financialized Times: Investor Loyalty,
Financialization and the Varieties of Capitalism” (pdf by professor)
William Janeway, Doing Capitalism: Capitalism in the Innovation Economy, Oxford
University Press, 2012, part 3
Session 10: Regional Governance in Europe
Sheri Berman and Kethleen, McNamara “Bank on Democracy,” Foreign Affairs (2000)
Benjamin Cohen and Herman Schwartz, “Debate on the future of the euro:
Commentary,” Review of International Political Economy, October 2012
Watch the video of Martin Wolf at Brown here:
http://brown.edu/web/livestream/archive/2012-euroconf.html
Mark Blyth Austerity: The History of a Dangerous Idea, Oxford University Press, 2012
(ch 4)
Jay Shambaugh, ‘The Euro’s Three Crises’ available at
http://www.brookings.edu/~/media/Files/Programs/ES/BPEA/2012_spring_bpea_papers/201
2_spring_BPEA_shambaugh.pdf
Session 11: Regional Governance and finance in the Global South: From Islamic
Finance to Mercosur
Lena Rethel, “Whose legitimacy? Islamic finance and the global financial order,” Review
of International Political Economy, 18 (1) 2011.
Mahrukh Doctor “Prospects for deepening Mercosur integration: Economic asymmetry
and institutional deficits” Review of International Political Economy, May 2012
Injoo Sohn “Toward normative fragmentation: An East Asian Financial Architecture in
the post-global crisis world” Review of International Political Economy, Oct. 2012
William Grimes, “The Asian Monetary Fund Reborn? Implications of Chiang Mai
Initiative Multilateralization,” Asia Policy, no. 11, January 2011, pp. 79-104.
7
Optional
Justin Lin: Demystifying the Chinese Economy
Review: http://www.ft.com/intl/cms/s/2/5acad17a-1cdf-11e1-a13400144feabdc0.html#axzz2B69Rfnfz
Session 12: Where now? The future of development and global finance
Eric Helleiner, States and the reemergence, conclusions
Barry Eichengreen, Globalizing Capital, conclusions
Eric Helleiner and Stefano Pagliari “The End of an Era in International Financial
Regulation? A Postcrisis Research Agenda”, International Organization, 65, Winter
2011, 169-200.
Mark Blyth, Austerity, Conclusions
William Janeway, Doing Capitalism: Capitalism in the Innovation Economy, Oxford
University Press, 2012, part 4
Optional
IMF (October 2012), World Economic Outlook.
DeLong, J B and L H Summers (2012), ‘Fiscal policy in a depressed economy’,
Brookings Papers on Economic Activity 2011
8
Session 13: Wrap-up
Data Sources on International Finance:
1. The IMF's publication, IMF Survey, is an invaluable resource. The publication is
posted on the IMF’s website, www.imf.org. Data on aggregate, regional and countrywide
financial sector and macroeconomic performance are presented in International Financial
Statistics (IMF/World Bank). This volume is published annually and is kept in the
Reference section of Penrose Library (call number is-- HJ8899.W672). The IMF’s
quarterly publication, World Economic Outlook, provides a survey and analysis
of key
trends in the global financial system. The IMF’s Global Economic Prospects is also a
useful publication. IMF publications are available on the institution’s website. The IMF’s
quarterly publication, Finance and Development, is a useful resource on financial policy
issues in the developing country context.
2. The IMF’s Balance of Payments Statistics Yearbook presents detailed data on the
balance of payments.
3. The World Bank’s two-volume publication, Global
Development Finance, provides comprehensive data on capital flows
(www.worldbank.org).
4. Cross-national macroeconomic data can be found in Main Economic Indicators,
published by the
Organization for Economic Cooperation and Development
www.oecd.org
5. The May issue of the US Commerce Department’s Survey of Current
Business summarizes US
international transactions for the preceding year (see www.stat-usa.gov or www.doc.gov).
6. The United Nations (www.un.org) publishes the annual World Economic Survey,
which covers
major issues facing the world economy.
7. The website www.cepr.net/, http://www.peri.umass.edu/home/peri/,
http://www.epi.org/,
http://www.iie.com/ publishes many useful studies of international
financial policy issues and debates.
8. The website http://www.financialpolicy.org/ is the best source for critical policy
analysis of derivatives and hedge funds.
9. Many blogs, e.g., http://www.projectsyndicate.org/, http://triplecrisis.com/, http://rodrik.typepad.com/, present useful
discussions of international financial issues.
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