Financialisation in Emerging Economies: Changes in Central Banking

Description

Since the beginning of the 2000s, emerging market economies, or middle-income countries, have embarked on major changes in their domestic financial systems. These changes – in which central banks have been key players – are shaped by the process of financialisation, which can generally be characterised by the dominance of financial considerations in the conduct of major agents (banks, non-financial corporations and households). As a consequence of the emerging markets crisis at the end of the 1990s, a new phenomenon in global financial markets emerged: a massive accumulation of foreign reserves in emerging economies. This has had important consequences for the global economy in which developed economies are the major beneficiaries. Based on Marxist political economy, this book studies the trends towards financialisation in emerging economies, focusing on the effects of the reserve accumulation in their international and domestic spheres. It argues that reserve accumulation has been the very catalyst of financialisation, being related to the subordinated position of emerging economies in the international monetary system. The chapters explore how these trends were exacerbated by the 2008 global financial crisis as well as the extraordinary monetary measures undertaken by the major central banks to deal with the effects of this. Foreign investors invested an enormous amount into emerging economies between 2010 and 2012 and emerging-market financial assets have doubled since 2008. To conclude, the book discusses how the US monetary policy normalisation has added more complexity to these trends since 2013 by putting pressure on emerging markets related to the level of global liquidity. This book provides essential reading for students and scholars of finance, economics and political economy who are interested in the unfolding of the subordinated financial integration of emerging economies into global financial markets. Cover Half Title Series Title Copyright Contents About the author Part I Setting the scene on financialisation in emerging market economies – financialisation and liquidity management: challenges to central banking in contemporary capitalism 1 Some notes on financialisation and a brief outline of the book Financialisation and macroeconomic policies: the institutional context 2 Political economy of financialisation: considerations on banks Finance and development: the emergence and relevance of banks on monetary relations Introduction 2.1 Neoclassical analysis of banks: some notes from the irrelevance of money to banks as information-gathering institutions 2.2 Post Keynesian analysis of banks: liquidity provision and portfolio management 2.2.1 Fundamental questions for banks: money and liquidity preference 2.2.2 Financial intermediation and banks’ liquidity preference 2.2.3 The banking system and capitalist development in post Keynesian economics: some considerations 2.3 Marxist analysis on banking relations: money-dealing and loanable capital 2.3.1 Commodities exchange and money 2.3.2 Money, capital and credit system: the emergence of banks 2.3.3 The banking system and capitalist development 3 Political economy of central banks: loanable capital movement and inflation-targeting regime On central banking: a political economy approach Introduction 3.1 A Marxist political economy approach to central banks 3.1.1 The genesis of central banks: some remarks on the main central banking approaches 3.1.1.1 Free banking system and the emergence of central banks 3.1.1.2 Towards a Marxist political economy of central banks: the central bank emergence in the capitalist economy 3.2 Central banks and the banking system: loanable capital movement 3.2.1 Central banks as pivot between domestic and international spheres 3.3 Political economy of central banks, macroeconomic institutional arrangement and financialisation: the catalyst role of the inflation-targeting regime 3.3.1 The inflation-targeting regime in the context of financialisation: enforcement towards homogenisation 3.3.2 The relation between central banks and banks’ balance sheets in the context of financialisation 4 Emerging economies in the era of financialisation: from deficit accumulation to reserve accumulation Introduction 4.1 Emergence of financial liberalisation in emerging countries and the crises of 1997–8 4.2 A Marxist analysis of international finance and its crises 4.2.1 Credit, accumulation and crisis 4.2.2 World money and international crises 4.2.3 World money supporting financialisation in US economy 4.3 Financialisation in emerging countries: major global drivers 4.3.1 Reserve accumulation after crises of 1997–8 and capital flows from developing to developed countries 4.3.2 Global growth of financial assets and rise of domestic indebtedness in emerging countries 4.3.3 The impact of reserve accumulation on the USA 4.4 The costs of reserve accumulation for emerging countries Part II Major emerging markets’ experiences across the global financial markets 5 A political economy analysis of central banks in the Brazilian and Korean economies: reserve accumulation, global financial crisis and monetary quantitative easing Introduction 5.1 Central banks and the global financial crisis in emerging countries 5.2 International capital flows and reserve accumulation: the behaviour and nature of capital flows in Brazil and South Korea in the 2000s 5.2.1 Setting the scene in Brazil and South Korea: general trends in current and capital flows 5.2.2 The international capital flows behaviour: portfolio and banking flows 5.2.3 On the nature of foreign exchange reserves accumulated in Brazil and South Korea 5.3 Reserve accumulation and its impact on the domestic financial system 5.3.1 Reserve accumulation and domestic public debt dynamic 5.4 Financialisation in crisis and central banks’ interventions during the global crisis 5.5 Some notes on global liquidity, capital flows management and the US monetary tapering: limits to reserve accumulation in emerging countries 6 Loanable capital movement in Brazil and South Korea: impacts on banks’ balance sheet and some considerations on economic development Introduction 6.1 Central banks’ liquidity management and banks’ balance sheet: loanable money capital and domestic financialisation 6.1.1 The Brazilian experience on banks’ balance sheet in the 2000s: rising in liquid assets and changes in credit allocation 6.1.2 The Korean experience on banks’ portfolio management: liquid assets and credit allocation 6.2 Loanable money capital and banking system behaviour during the 2008 GFC in Brazil and South Korea 6.2.1 The Brazilian experience: the special role of repos 6.2.2 The Korean experience: rising of arbitrage operations 6.3 Financial derivatives markets in South Korea and Brazil: similarities and differences 7 Loanable capital movement in selected emerging market economies countries: international capital flows, reserve accumulation, impacts on banks’ portfolio and some considerations on economic development 7.1 International capital flows and reserve accumulation: drivers of international financialisation 7.2 Central banks’ liquidity management and banks portfolio: loanable money capital and domestic financialisation Final considerations References Index