Global imbalances and financial capitalism

Financialization is a set of related phenomena that reveal “the increasing role of financial motives, financial markets, financial instruments, financial actors, and financial institutions in the operations of domestic and international economies.”

Gerald A. Epstein (2005).

After the demise of the Keynesian consensus and the fall of the international monetary system based on the Bretton Woods Agreements, we have witnessed the emergence of two complexly intertwined phenomena, namely, Financialization and Global Imbalances.

Published by Routledge in the series Frontiers of Political Economy, this new book, Global Imbalances and Financial Capitalism, written by Jacques Mazier, Vincent Duwicquet, Luis Reyes, Sebastian Valdecantos and I, aims at exploring the complex interactions between these two aforementioned developments through the lens of non-mainstream macroeconomic modelling.

Abstract. The past few decades have witnessed the emergence of economic imbalances at the world level and within the euro zone. The failure of mainstream economics to accurately predict financial crises, or model the effects of finance-led growth, highlights the need for alternative frameworks.

A key text, Global Imbalances and Financial Capitalism: Stock-Flow-Consistent Modelling demonstrates that Stock-Flow-Consistent models are well adapted to study this growth regime due to their ability to analyse the real and financial sides of the economy in an integrated way. This approach is combined with an analysis of exchange rate misalignments using the Fundamental Equilibrium Exchange Rate (FEER) methodology, which serves to give a synthetic view of international imbalances. Together, these models describe how global and regional imbalances are created, as well as suggest appropriate tools through which they may be reduced. The book also considers alternative economic policies in the euro zone (international risk sharing, fiscal federalism, eurobonds, European investments, a multispeed euro zone) alongside alternative monetary policies. In particular, it examines the possibilities of using SDR (Special Drawing Rights) as a reserve asset to be issued to fight a global recession, to support the development of low-income countries, or as an anchor to improve global monetary stability.

This text will be of interest to students, scholars, and researchers of economic theory and international monetary economics. It will also appeal to professional organizations who supervise international relations.

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