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Financial liberalisation can promote economic development in developing and emerging economies (DEEs). Especially international financial flows pose risks to the stability of their financial system though, as recurrent foreign debt crises in DEEs show. How can DEEs benefit from international financial flows while safeguarding financial stability? The case of South Korea shows how DEEs can develop domestic policy frameworks to manage international financial flows while maintaining a high degree of financial openness. With the experience of the foreign debt crisis of 1997/98 in mind, Korean policymakers have interlinked policies (monetary policy, foreign exchange policy and financial regulation), public financial institutions and the development of domestic capital markets to develop a financial stability-oriented policy framework that has served as protection against risks attached to international financial flows. While this policy change substantiates a turn towards a finance-led accumulation regime, the case of Korea illustrates that DEEs are not passive bystanders in financialisation processes. [ABSTRACT FROM AUTHOR]

Understanding the nature of state financialisation is crucial to ensure de-financialisation efforts are successful. Therefore, this article provides a structured overview of the emerging literature on financialisation and the state. We define financialisation of the state broadly as the changed relationship between the state, understood as sovereign with duties and accountable towards its citizens, and financial markets and practices, in ways that can diminish those duties and reduce accountability. We then argue that there are four ways in which financialisation works in and through public institutions and policies: adoption of financial logics, advancing financial innovation, embracing financial accumulation strategies and directly financialising the lives of their citizens. Organising our review around the two main policy fields of fiscal and monetary policy, four definitions of financialisation in the context of public policy and institutions emerge. When dealing with public expenditure on social provisions, financialisation most often refers to the transformation of public services into the basis for actively traded financial assets. In the context of public revenue, financialisation describes the process of creating and deepening secondary markets for public debt, with the state turning into a financial market player. Finally, in the realm of monetary policy, financial deregulation is perceived to have paved the way for financialisation, while inflation targeting and the encouragement, or outright pursuit, of market-based short-term liquidity management among financial institutions constitute financialised policies. [ABSTRACT FROM AUTHOR]

The paper documents and analyses the World Bank's promotion of foreign ownership of banking in developing countries. In the wake of two decades of financial crises following exercises of orthodox financial reform, the World Bank has not only continued to push privatisation, but now sees foreign banks as the missing component that will deal with the downside risks of financial liberalisation. Concerns that foreign banks might reduce small and medium enterprise (SME) loan access because of information problems are largely dismissed by the Bank. In fact the World Bank argues for the very opposite, the existence of foreign banks is likely to have the effect of pushing local banks into SME markets where they have a greater comparative advantage. The question of access to credit for the private sector, particularly the locally owned small and medium size enterprises, is central to the issue of employment generation and poverty reduction in developing countries where the bulk of new jobs are typically created by these companies. This article traces the development of the World Bank's agenda on foreign ownership. It critically assesses the arguments and empirical work underlying the World Bank analysis and draws on alternative empirical testing and case studies to raise serious questions about the downside risks associated with the internationalisation of banking. [ABSTRACT FROM PUBLISHER]

The 1994-95 ‘peso’ crisis did not display characteristics which allow it to be easily captured by traditional crisis models. Models based on Minsky's financial fragility hypothesis offer more persuasive accounts but have been supported by relatively little direct empirical evidence. This paper provides such evidence, with particular attention being paid to the role of domestic financial liberalisation in the process. Minsky's hypotheses about the evolution of expectations over the business cycle are tracked using business survey data. In addition, crisis indicators are constructed, reflecting the changing vulnerability of the economy to shocks. The findings support a Minskyian interpretation of the crisis. [ABSTRACT FROM AUTHOR]

This paper takes the unusual step of exploring economic hypotheses through interviews with key economic agents. It focuses on the causes of Ecuador's 1999 banking collapse, within an eclectic framework with Minskian elements. Broad support is found for 'endogenous' explanations of financial crises and little backing for explanations such as accidents or policy mistakes. Interviewees argued that after the stabilisation programme of 1992, agents became euphoric and accumulated debt to finance imprudent levels of expansion; that incentives for moral hazard led to financial corruption and excessive risk taking; and that weak regulation after financial liberalisation encouraged financial fragility. [ABSTRACT FROM AUTHOR]