Neoliberalism and International Financial Instability

Abstract

This paper attempts to expand upon a Minskian model of domestic financial crises to take account of the following international developments: capital inflows that increase financial fragility, foreign financing of deregulated domestic speculative markets, overcapacity in export markets, capital outflows leading to collapsing currencies, restrictive macroeconomic policy oriented toward boosting international investor confidence, and International Monetary Fund bailout packages in the wake of financial crises.

The paper concludes that the institutional changes in the international financial system responsible for the developments listed above came about as a result of the policies and strategies of neoliberalism.

Keywords

Neoliberalism Macroeconomic policy Minskian crisis

Get full access to this article

View all access options for this article.

References

Chang, Ha-Joon , Hong-Jae Park , and Chul Gue Yoo . 1998. Interpreting the Korean Crisis: Financial Liberalization, Industrial Policy and Corporate Governance. Cambridge Journal of Economics 22: 735-746.

Crotty, James . 1994. Are Keynesian Uncertainty and Macrotheory Compatible? Conventional Decision Making, Institutional Structures, and Conditional Stability in Keynesian Macromodels. In New Perspectives in Monetary Macroeconomics. G. Dymski and R. Pollin (eds.). Pp. 105-139. Ann Arbor, Mich.: University of Michigan Press.

Crotty, James and Gary Dymski . 1998. Can the Global Neoliberal Regime Survive Victory in Asia? The Political Economy of the Asian Crisis. Forthcoming in International Papers in Political Economy 5(2): 1-47.

Fisher, Irving . 1933. The Debt-Deflation Theory of Great Depressions. Econometrica 1:337-357.

Grabel, Ilene . 1999. Rejecting Exceptionalism: Reinterpreting the Asian Financial Crises. In Global Instability and World Economic Governance. J. Michie and J. Greve Smith (eds.). London: Routledge.

Greider, William . 1997. One World, Ready or Not. The Manic Logic of Global Capitalism. New York, N.Y.: Simon and Schuster.

Kregel, Jan . 1998. Yes, " It" Did Happen Again—A Minsky Crisis Happened in Asia. Working Paper No. 234, The Jerome Levy Economics Institute.

Minsky. Hyman P. 1977. A Theory of Systemic Fragility. In Financial Crises: Institutions and Markets in a Fragile Environment. Edward I. Altman and Arnold W. Sametz (eds.). New York, N.Y.: John Wiley and Sons.

Minsky. Hyman P. 1982. Debt Deflation Processes in Today's Institutional Environment. Banca Nazionale Del Lavoro Quarterly Review 143: 377-393.

10.

Wolfson, Martin H. 1994. Financial Crises: Understanding the Postwar U.S. Experience. Second Edition. Armonk, N.Y.: M.E. Sharpe.

11.

Wolfson, Martin H. 1996. Irving Fisher's Debt-deflation Theory: Its Relevance to Current Conditions. Cambridge Journal of Economics 20: 315-333.