Archive for May 10th, 2007

A discussion on Financial Globalization

May 10, 2007

IMF conduced a conference on Financial Globalization on April 26-27, 2007. The conference was tiltled New Perspectives on Financial Globalization. A wide variety of papers were discussed and you can find all of them here

What caught my eye was the discussion which took place after the conference. The transcript is available here

The discussants were:
GUILLERMO A. CALVO, Columbia University
JEFFREY A. FRANKEL, Harvard University
KENNETH S. ROGOFF, Harvard University

I couldnt understand much what Calvo said but the discussion by Frankel and Rogoff was excellent and by Frankel in particular.

Frankel puts forward few quotes to the audience and asks them to guess who said the same. Here are a few:

“When financial markets swing more like a wrecking ball than a pendulum, knocking over one economy after another.” — Soros

“Liberalization of foreign financial flows is not regarded as a high priority.” — John Williamson (the guy who was responsible for the Washignton Consensus)

“While there is no proof in the data that financial globalization has benefited growth, there is evidence that some countries may have experienced greater volatility as a result.” — Ken Rogoff, Eswar Prasad etc.

He gives advantages and disadvantages of financial globalization. I loved in particular his theory that “all important generalizations about emerging market crises can be phrased in terms of the car crash analogy” He has ten such cases to explain. Sample this:

“One, sudden stops. It is not the speed that kills, it is the sudden stops that I attribute to Dornbush and Calvo. Second, superhighways. Modern financial markets get you where you want to go fast, so we are better off with them. That is an important conclusion. But when accidents happen they are bigger, and so more care is required. I think this is Bob Merton…..”

The second (in car crash analogy) one was then corrected by Rogoff and he said it was Larry Summers who said the same. Rogoff in turn also summarises a lot of good research on the subject.

Super Stuff!!

Assorted Links

May 10, 2007

1. Indian Rupee : Level vs Volatility? A nice article

2. Germany plans regulation for Hedge Funds

3. Expect Sarkozy to usher reforrms in French Economy? Not really

4. A Wedding at a Funeral Home?

Thanks to Ajay Shah for 1.

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