Next Great Globalization

Frederic S. Mishkin is Alfred Lerner Professor of Banking and Financial Institutions at the Columbia University Graduate School of Business, a research associate at the National Bureau of Economic Research, and a member of the Federal Reserve's board of governors. He is the author of many books, including "Monetary Policy Strategy" (MIT), "The Economics of Money, Banking, and Financial Markets" and (with Ben S. Bernanke, Thomas Laubach, and Adam S. Posen) "Inflation Targeting" (Princeton).

• Preface ix Chapter One: The Next Great Globalization: A Force for Good? 1 Part One: Is Financial Globalization Beneficial? Chapter Two: How Poor Countries Can Get Rich: Strengthening Property Rights and the Financial System 19 Chapter Three: Financial Development, Economic Growth, and Poverty 36 Chapter Four: When Globalization Goes Wrong: The Dynamics of Financial Crises 49 Part Two: Financial Crises in Emerging Market Economies Chapter Five: Mexico, 1994-1995 71 Chapter Six: South Korea, 1997-1998 85 Chapter Seven: Argentina, 2001-2002 106 Part Three: How Can Disadvantaged Nations Make Financial Globalization Work for Them? Chapter Eight: Ending Financial Repression: The Role of Globalization 129 Chapter Nine: Preventing Financial Crises 137 Chapter Ten: Recovering from Financial Crises 164 Part Four: How Can the International Community Promote Successful Globalization? Chapter Eleven: What Should the International Monetary Fund Do? 175 Chapter Twelve: What Can the Advanced Countries Do? 200 Part Five: Where Do We Go from Here? Chapter Thirteen: Getting Financial Globalization Right 211 Notes 221 References 277 Acknowledgments 305 Index 307

"This is an excellent, easy-to-understand and well-written exposition of the benefits of financial globalization, persuasively setting out the case for financial liberalization in developing countries--against the tidal wave of much current academic thinking on the matter."--Nigel Grimwade, Times Higher Education Supplement "Frederic Mishkin ... argues in an important new book, foreign capital can bring big gains at the microeconomic level: more competition, new technology and modern managerial know-how. Inflows of foreign direct investment into the financial system itself are particularly valuable to an emerging country."--Financial Times "Frederic S. Mishkin ... argues that when handled with proper safeguards, financial openness can confer many benefits that are often overlooked, like reducing corruption and busting up local monopolies and business oligarchies."--Paul Blustein, Washington Post "The next great globalization, according to Frederic Mishkin's new book ... will be financial in character: the flow of foreign money into stocks, bonds and banking in emerging economies... Mr. Mishkin makes a clear and compact case for cosmopolitan capital; and his footnotes ... weigh and tally a wealth of economic research."--The Economist "In this economic equivalent of tough love, Mishkin seldom uses a qualifying phrase. The premise is crystal clear: choose the path of globalization that leads to economic development, higher income levels, and general prosperity, or choose the path of globalization that leads to stagnation, stasis, and lower living standards... Advocates of free trade will nod their heads in agreement, and opponents will find plenty of food for thought."--Choice "The Next Great Globalization is a compelling read for anyone with an interest in the real-life complexities of economic development, and its focus on the often overlooked or maligned role of financial institutions is very welcome."--Diane Coyle, International Affairs "Offers a plan for reform of developing nations' banking systems... Valuable--and achievable--recommendations for change... The Next Great Globalization describes the failings of the International Monetary Fund well, in part a result of Mishkin's experience as an outside evaluator of the organization."--BusinessWeek "This book addresses an important global problem: the low state of development experienced by much of the world's population, and it makes a valuable contribution to the development literature by focusing on domestic institutions. Moreover, while most economic discussion about institutions is highly abstract, Mishkin focuses on financial institutions."--Eva Marikova Leeds, Eastern Economic Journal "This book by a prominent economist and Fed Governor provides invaluable insights into the financial development process, drawing on theoretical research and country experiences to distill the lessons for policymakers. It explains how globalization--both real and financial--can bring prosperity, stability, and wealth to emerging market countries that put in place the necessary institutional reforms when liberalizing their financial systems. The Next Great Globalization is intended not just for economists but also for broader audiences with an interest in financial issues."--Miranda Xafa, World Economics "This is a workmanlike book written in plain English about an important but currently controversial subject: financial globalization. Its judgements are, by and large, sound... [I]t is ... worthwhile to have the traditional virtues of financial globalization set out simply and clearly."--Deepak Lal, International History Review "This book's arguments are backed by sound economic research, and there are important policy lessons to be learned. The material will be valuable for economists and policymakers across the world, but particularly to those working in developing countries and at international financial institutions."--Jose R. Sanchez-Fung, Economic Change and Restructuring