Berti amino Moro Victor A. Beker. Modern Financial Crises. Argentina, United States and Europe. ^ Springer

Transcription

1 Berti amino Moro Victor A. Beker Modern Financial Crises Argentina, United States and Europe ^ Springer

2 Contents Part I Introduction 1 The Core Characteristics of Financial Crises Introduction The Liquidity Nature of Financial Crises The Greenspan Put or the TBTF Paradigm Is a Financial Crisis Predictable? The Dispute on the "Black Swan" Versus the Regularity Hypothesis of Financial Crises What Modern Financial Crises Teil Us for Economic Theorizing? The Extension of the Great Crisis to the European Sovereign Debt and Banking Sector Conclusions 22 References 23 Part II The Gase of Argentina 2 Argentina's Debt Crisis Introduction Argentina's Economic Performance in the 1990s Country's Solvency and the Argentine Case The Reasons for Argentina's Growing Public Sector Debt The Role of the IMF Summary 41 References 41 Part III The American Subprime Crisis 3 The American Financial Crisis Introduction The Money Glut 46 xiii

3 xiv Contents 3.3 The Role of Credit Rating Agencies The Role of Banks 3.5 The Role of Regulators A White or a Black Swan? Conclusion ^ SR References 4 The Run on Repo and the Policy Interventions to Struggle the Great Crisis Introduction The Role of the Sale and Repurchase (Repo) Market The Shadow Banking System and the Securitization Process The Demand for Collateral and the Rise of Repo Market: The Explosion of the Crisis Managerial Compensation Schemes and the Pricing of Risk Fiscal Stimulus and Monetary Policy Interventions to Struggle the Crisis Conclusions 75 References 75 Part IV The European Public Debt Crisis 5 From the American Financial Meltdown to the European Banking and Public Debt Crises Introduction The Shift of the Great Crisis into a European Twin Sovereign Debt and Banking Crisis Who Was Responsible for the European Crisis? Mispricing of Sovereign Risk by Financial Markets The Misalignment of Internal Real Exchange Rates and the Ensuing Balance-of-Payment Crisis The Link Between TARGET2 Positions and EMU Countries Balances of Payments Large Increases in TARGET2 Liabilities Are Mostly Related to Capital Flight Conclusions 101 References ] 02 6 The European Crisis and the Accumulation of TARGET2 Imbalances Introduction The Accumulation of TARGET2 Imbalances The Flow and the Stock Interpretation of TARGET2 Balances III

4 Contents xv 6.4 Insufficient Responses and Tensions Araong Euro Area Governments The Fragmentation of the European Financial System Along National Borders The ECB's Loss of Control over Interest Rates in the Crisis-Hit Countries The Credit Channel Paradox Concluding Remarks: The Role of Germany in Promoting European Recovery 127 References The European Debt Crisis Introduction Evolution of Countries' Indebtedness Specifics of the Euro Area Public Debt The New Highly Indebted Countries: The Cases of Ireland and Iceland The Case of Ireland The Case of Iceland The "Old" Indebted Countries: The Case of Greece Exchange Rate and Regional Imbalances Is Argentina a Valid Example for Greece? The Case of Portugal Spain: A Special Case Italy: A Different "Old" Debtor Is There Any Role the Euro Rate of Exchange Can Play in the Adjustment Process? Summary and Conclusions 156 References 159 Part V The Impact of the Great Crisis on Economic Thought 8 The Theoretical Debate on the Great Crisis Introduction Paul Krugman on Saltwater Versus Freshwater Economists The Keynesian Tradition from the Great Moderation to the Great Crisis The Neoclassical Views and the Efficient-Market Hypothesis Stabilization Policies and the Trade-Off Between Stagnation and High Inflation Panic, Systemic Risks, and the Need of a New Financial Regulation Conclusions 179 References 180

5 xvi Contents 9 From the Economic Crisis to the Crisis of Economics Introduction ' 9.2 The Criticisms of the Economics Profession What Is Economics Guilty of? Is Neoclassical Economics Innocent? What Economists Do Know What Sort of Science Is Economics? On the Use of Mathematics in Economics Health Versus Illness in Economic Analysis Is There a Unique Economic Theory or a Collection of Economic Theories? Conclusions 197 References Rethinking Macroeconomics in Light of the Great Crisis Introduction From Keynes to Lucas RBC Theory The Economic Crisis from a Neoclassical Perspective Back to Keynes The Wealth Effect and Price Asymmetry The Role of Investment Keynes on Savings Keynes on Inflation Hyman Minsky's Contribution to Financial Theory Conclusions 215 References 217 Part VI Current Issues and Conclusions 11 Current Issues and Policies Introduction Argentina: The New 2014 Default The USA After the Crisis The Dodd-Frank Act The Need for a Global Lender of Last Resort and the Interest Rate Risk Europe: Current and Open Issues The EMU's Crisis-Hit Countries Assistance Programs The Unsuccessful Results of the First Two Assistance Programs in Greece: Is There a Third Bailout Coming? Some Remaining Institutional Matters Has the ECB the Role of Lender of Last Resort? 236

6 Contents xvii The ECB's Quantitative Easing Monetary Policy The Legacy of the Euro Crisis and Conclusions 241 References Open Problems and Conclusions Introduction The Role of the IMF The Role of Credit Agencies' Ratings Why Do Investors Often Make the Wrong Choice? Some Issues at Stake in Financial Regulation The Case of Public Debt Rethinking Economics 255 References 257