پنجشنبه ۲۲ شهریور ۰۳ | ۱۹:۵۶ ۹ بازديد
butional effects as monetary phenomena work their way through the
economy, just as “a river which runs and winds about in its bed will not
flow with double the speed when the amount of water is doubled.”32
Cantillon’s work was followed in the nineteenth century by John E.
Cairnes and in the twentieth by John Maynard Keynes.33 Keynes, in his
Treatise on Money, followed Cantillon and Cairnes with his argument
that changes in purchasing power that result from monetary contrac-
tions or expansions are “not spread evenly or proportionately over the
various buyers.” The “new distribution of purchasing power” will have
“social and economic consequences” that “may have a fairly large lasting
effect on relative price levels.” Once again, the argument here is not
that monetary disturbances affect aggregate output; rather, it empha-
sizes the consequences of monetary phenomena even in the absence of
such effects. “The fact that monetary changes do not affect all prices in
the same way, to the same degree, or at the same time, is what makes
them significant.”34
Ironically, it was subsequent work by Keynes that led to the atrophy
of this line of inquiry. In The General Theory (1936), which dominated
the profession for a generation and ushered in the era of modern
macroeconomics, Keynes shifted his emphasis away from monetary in-
fluences. The vigorous monetarist response that followed kept the arena
of the debate where it was, at the aggregate level. 35 But students of the
politics of money need to revisit and build upon the insights of this lit-
erature, which was not superseded but rather was left to atrophy, as the
focus of the economics profession followed an alternative trajectory. It
is the differential, political effects of macroeconomic phenomena that
STUDY OF MONEY 427
32 Richard Cantillon, Essai sur la nature du commerce en général, ed. and trans. Henry Higgs (1931;
New York: Augustus Kelley, 1964), 161, 179, 177. For practical illustrations of distribution effects, see
pp. 163, 165. W. Stanley Jevons characterized Cantillon’s tracing of monetary disturbances as “mar-
velous.” See Jevons, “Richard Cantillon and the Nationality of Political Economy,” Contemporary Re-
view 39 ( January 1881), 72. It is important to note that Cantillon was no monetary crank; in fact, he
was quite orthodox. He did not believe that a monetary expansion would increase economic activity in
the long run. Rather, he was an opponent of inflation who believed that the inflationary process would
have self-reversing effects with attendant real economic costs. And he was sensitive to the danger that
macroeconomic policy might be manipulated by politicians for their own benefit. See Cantillon, p.
323; also Vickers (fn. 31), 212, 216; Bordo (fn. 31), 237, 251; Murphy (fn. 31), 263, 277.
33 John E. Cairnes, Essays in Political Economy: Theoretical and Applied (1873; New York: Augustus
Kelley, 1965), esp. 9, 10; also Michael Bordo, “John E. Cairnes on the Effects of the Australian Gold
Discoveries, 1851–73,” History of Political Economy 7 (Fall 1975).
34 Keynes, A Treatise on Money I: The Pure Theory of Money (1930), in Moggridge and Johnson (fn.
14), 5:81, 83–84.
35 See Perry G. Mehrling, The Money Interest and the Public Interest: American Monetary Thought,
1920–1970 (Cambridge: Harvard University Press, 1997); and Charles Rist, History of Monetary and
Credit Theory: From John Law to the Present Day, trans. Jane Degras (1940; New York: Augustus M.
Kelley, 1966), esp. 148, 375.
and clarify the extent to which the choice of a “legitimate” economic
policy may be of greater political than economic consequence.
This can be illustrated with two policy examples—one regarding in-
flation management and the other, capital mobility—that are of great
practical importance and contemporary salience. In each case, one pol-
icy has a sole, consequential, and self-reinforcing claim to economic le-
gitimacy. But in each case there are also alternative policies that from
an economic perspective are equally plausible. Despite their internal
consistency, however, they are virtually unsustainable solely because
they lack legitimacy. What matters here is not the policy choice per se—
as just noted, either is plausible—but rather the way in which the win-
ning policy is anointed. Stripped of their rhetorical dressing, the aggre-
gate economic distinctions between competing policies are ambiguous
and modest and dwarfed by their differential effects. Narrow political
interests better account for the path chosen.
IMAGINE LOW INFLATION
A dramatic example of the extent to which economic legitimacy cloaks
profound political consequences can be seen with the hegemonic
proposition that vigilance against the threat of inflation must be the
primary, if not the sole, goal of macroeconomic policy. This view de-
rives from the recognition, supported by evidence, that governments
cannot call forth greater employment and production in the long run
via monetary expansion. But the only conclusion that can be drawn
from this is that governments should not purposefully promote infla-
tion to expand output. It does not address the question of whether in-
flation itself is costly or “bad” or whether suppressing inflationary
embers need be the principal goal of policy.
There are many deductive reasons why inflation might impose real
economic costs, and models can be constructed to simulate why infla-
tion should be costly in practice. Inflation, for example, can weaken the
informational role of prices. This can also reduce efficiency by increas-
ing uncertainty. There is empirical support for these propositions, as in-
flation has been shown to be associated with greater variability in prices
and the variability of real output. Inflation, as a tax on cash balances,
also carries with it the inefficiencies associated with excise taxes.36
428 WORLD POLITICS
36 For a summary of possible costs, see Stanley Fischer and Franco Modigliani, “Toward Under-
standing of the Real Effects and Costs of Inflation,” in Fischer, Indexing, Inflation, and Economic
some inflation might actually be a good thing (that is, the inflation rate
associated with the maximum possible rate of economic growth is pos-
itive). Such arguments often center around the view that in an econ-
omy where nominal prices are sluggish to adjust downward, some
inflation would allow changes in relative prices, an essential feature of
any growing economy, to occur faster and more efficiently. In fact, “in-
flation may be a necessary part of the process,” and deductive models
can be constructed and simulations run to show that in fact moderate
inflation “permits maximum employment and output.”37
Given the indeterminacy of deductive arguments and the relative
abundance of data on inflation rates and growth rates, the obvious next
step is to evaluate the evidence. In fact, the costs of moderate inflation
are extraordinarily difficult to find. Inflation hawk Robert Barro, who
had previously written that while economists assume that inflation is
costly, they “have not presented very convincing arguments to explain
these costs,”38 attempted to illustrate those costs in two recent papers. He
concludes that the data reveal costs that seem small yet have a cumulative
effect that is “more than enough to justify a strong interest in price sta-
bility.” He notes, however, that the “clear evidence” of the costs of in-
flation come from countries that have had inflationary episodes
exceeding 10–20 percent per year. The qualifications are even stronger
in his follow-up paper: “For inflation rates below twenty percent per
year . . . the relation between growth and inflation is not statistically
significant.”39
STUDY OF MONEY 429
Policy (Cambridge: MIT Press, 1986). On information, see Gardner Ackley, “The Costs of Inflation,”
American Economic Review 68 (May 1978). On variability, see Richard W. Parks, “Inflation and Rela-
tive Price Variability,” Journal of Political Economy 86 (February 1978). On cash-balance effects, see
Martin J. Bailey, “The Welfare Cost of Inflationary Finance,” Journal of Political Economy 64 (April
1956). Deductive models that can yield high costs of inflation include Michel Dotsey and Peter Rich-
mond, “The Welfare Cost of Inflation in General Equilibrium,” Journal of Monetary Economics 37
(February 1996); and Martin Feldstein, “The Welfare Cost of Permanent Inflation and Optimal
Short-Run Economic Policy,” Journal of Political Economy 87, no. 4 (1979).
37 James Duesenberry, “Inflation and Income Distribution,” in Eric Lundberg, ed., Inflation Theory
and Anti-Inflation Policy (Boulder, Colo.: Westview Press, 1977), 265 (first quote); George Akerlof,
William Dickens, and George Perry, The Macroeconomics of Low Inflation, Brookings Papers on Eco-
nomic Activity, no. 1 (1996), 2 (second quote). Very low inflation also might undermine monetary pol-
icy, given a nominal interest-rate floor of 0 percent.
38 Robert J. Barro and David B. Gordon, “Rules, Discretion, and Reputation in a Model of Mone-
tary Policy,” Journal of Monetary Economics 12 (February 1983), 104.
39 Robert J. Barro, “Inflation and Economic Growth,” Bank of England Quarterly Bulletin 35 (May
1995), 1, 9; and idem, “Inflation and Growth,” Federal Reserve Bank of St. Louis Review 78 (May–June
1996), 159. Critics of these papers have challenged Barro’s policy prescriptions. W. Stanners argues
that even the “weak conclusion” of the first paper “cannot be sustained.” Stanners, “Inflation and
Growth,” Cambridge Journal of Economics 20 ( July 1996), 511, also 512. In commentary following the
second paper, Kocherlakota Narayana argues that “I would recommend that policymakers not view
lower long run growth as a penalty of inflationary monetary policy” (p. 172).
growth are dependent on the consequences of very high levels of infla-
tion.40 Ultimately, any real economic costs of inflation, especially infla-
tion below 20 percent and certainly below 10 percent, are almost
impossible to show. While one study has claimed to demonstrate that
inflation over 8 percent is costly (with inflation below 8 percent having
a slight positive effect), another study claims to produce “direct evi-
dence against the view that inflation and output growth are reliably re-
lated in the long run.” 41 But even studies that manage to show some
relationship between inflation and growth need to be interpreted very
cautiously. 42
For those who study the politics of money, the final resolution of this
debate is not of great concern. The evidence overwhelmingly supports
the view that inflation rates at low or moderate levels have very little ef-
fect on the performance of the aggregate economy. This casts new light
on the long-held understanding that inflation has distributional conse-
quences 43 and on the less appreciated but just as important observation
430 WORLD POLITICS
40 Two prominent examples of this would be Stanley Fischer, “The Role of Macroeconomic Factors
in Growth,” Journal of Monetary Economics 32 (December 1993); and Michael Bruno, “Does Inflation
Really Lower Growth?” Finance and Development 32 (September 1995), 35, 38. Yet Bruno and Fis-
cher each support policies designed to keep inflation very low. See Fischer, “Maintaining Price Stabil-
ity,” Finance and Development 33 (December 1996), 34–37; Michael Bruno and William Easterly,
“Inflation and Growth: In Search of a Stable Relationship,” Federal Reserve Bank of St. Louis Review 78
(May–June 1996), 145.
41 Michael Sarel, “Non-linear Effects of Inflation on Economic Growth,” IMF Staff Papers 43
(March 1996); James Bullard and John W. Keating, “The Long-Run Relationship between Inflation
and Output in Postwar Economies,” Journal of Monetary Economics 36 (December 1995), 495. Bullard
and Keating also note some positive effects: “To the extent that we do find statistically significant es-
timates, they tend to be positive, with a permanent increase in inflation being associated with a per-
manent increase in the level of output” (p. 494).
42 First, the findings of studies showing relationships between inflation (and other macroeconomic
variables) and growth are quite fragile. See Ross Levine and David Renelt, “A Sensitivity Analysis of
Cross-Country Growth Regressions,” American Economic Review 82 (September 1992). Second, infla-
tion, especially high inflation, might be associated with lower economic performance because high in-
flation might be a symptom of government incompetence. In this case, the inflation could be a
symptom of government-inhibited growth rather than a cause. This is recognized by Fischer (fn. 40,
1993), 487. Third, as Bruno notes (fn. 40), an association of inflation with growth could be the result
of other factors, such as supply shocks, that would affect both factors simultaneously (p. 35).
43 Few would dispute the notion, for example, that unanticipated inflation benefits debtors at the
expense of creditors or that governments often use inflation as a means of increasing their resources
relative to society. In fact, inflation affects distribution through a multitude of channels, with differen-
tial effects on various individuals, classes, sectors, and regions.
Empirical investigations into the effects of inflation include Edward Wolff, “The Distributional Ef-
fects of the 1969–75 Inflation on Holdings of Household Wealth in the United States,” Review of In-
come and Wealth 25 ( June 1979); G. L. Bach and James Stephenson, “Inflation and the Redistribution
of Wealth,” Review of Economics and Statistics 61 (February 1974); William D. Nordhaus, “The Effects
of Inflation on the Distribution of Economic Welfare,” Journal of Money, Credit, and Banking 5 (Feb-
ruary 1973); Edward C. Budd and David F. Seiders, “The Impact of Inflation on the Distribution of
Income and Wealth,” American Economic Review 61 (May 1971); Armen A. Alchian and Reuben A.
Kessel, “Redistribution of Wealth through Inflation,” Science 130 (September 4, 1959); G. L. Bach and
stability, gives rise to inequalities as between the citizens of one and the
same country.” 44
If vigilance against inflation were the unambiguously universal opti-
mal economic policy, then these distributional quibbles would be of
only marginal interest—all groups seem to support bad policies that ad-
vance their own narrow interests. But as the economics becomes more
ambiguous, the demand for a political explanation must increase. If the
hypervigilant policy is but one plausible policy available from a larger
menu, then it is likely that the distinct distributional effects of each
policy choice, not its economic efficiency, explain the outcome.
This perspective can also explain the support for another pillar of le-
gitimacy, the sanctity of central bank independence ( CBI ). Support for
CBI derives from the need to guard against inflation. And increased CBI
is, in fact, associated with lower rates of inflation. But while there is ev-
idence that independent central banks are associated with lower infla-
tion, there is no evidence that they are associated with enhanced
economic performance. 45 This is surprising, since, for example, it was
assumed that the greater credibility of independent central banks would
cause disinflationary episodes to be both shorter and less costly. In fact,
the opposite is true. “In direct contradiction” to the credibility hypoth-
esis, “disinflation appears to be consistently more costly and no more
rapid in countries with independent central banks.” Rather than receiv-
ing a bonus, independent central banks “have to prove their toughness
repeatedly, by being tough.”46
But monetary policy can be too tight, and disinflationary policies are
unambiguously associated with output losses. A policy of emphasizing
inflation fighting and delegating responsibility for monetary policy to
STUDY OF MONEY 431
Albert Ando, “The Redistributional Effects of Inflation,” Review of Economics and Statistics 39 (Feb-
ruary 1957); Reuben A. Kessel, “Inflation Caused Wealth Redistribution: A Test of a Hypothesis,”
American Economic Review 46 (March 1956); Hyman Sardy, “The Economic Impact of Inflation in
Urban Areas,” and Zbignew Landau, “Inflation in Poland after World War I,” both in Neil Schumuk-
ler and Edward Marcus, eds., Inflation through the Ages (New York: Columbia University Press, 1983).
44 Rist (fn. 35), 375.
45 See Alberto Alesina and Lawrence H. Summers, “Central Bank Independence and Macroeco-
nomic Performance: Some Comparative Evidence,” Journal of Money, Credit, and Banking 25, no. 2
(1993); and Alex Cuckierman, “Central Bank Independence and Monetary Control,” Economic Journal
104 (1994), 1440. For a good survey of this large literature, see Sylvester Eijffinger and Jakob De
Haan, The Political Economy of Central-Bank Independence, Special Papers in International Economics
19 (Princeton: International Finance Section, Princeton University, 1996).
46 Adam Posen, “Central Bank Independence and Disinflationary Credibility: A Missing Link?”
Federal Reserve Bank of New York Staff Reports 1 (May 1995), 3, 13 (first quotes); Guy Dabelle and
Stanley Fischer, “How Independent Should a Central Bank Be,” in Jeffrey C. Fuhrer, ed., Goals, Guide-
lines and Constraints Facing Monetary Policymakers (Boston: Federal Reserve Bank of Boston, 1995),
205 (last quote); see also Eijffinger and De Haan (fn. 45), esp. 36, 38, 64.
garding this potential threat to the real side of the economy. 47 In any
event, the aggregate economic effects of the sole “legitimate” policy
choice ( CBI ) are modest and ambiguous.
A focus on the real, microlevel effects of monetary phenomena clar-
ifies the sharp politics, as opposed to the ambiguous economics, that is
driving macroeconomic policy. Low inflation and perhaps more impor-
tantly the macroeconomic policies designed to assure that it remains
very low benefit some groups in society at the expense of others. As
Adam Posen has argued, low inflation is only sustainable if it has ade-
quate political support. That support, he suggests, comes from numer-
ous sources but especially from “one historically prominent interest
group: the financial sector.” The financial sector supports central bank
independence “as a long-run means to price stability” and it could not
be sustained “without that group’s ongoing protection of its counter-
inflationary activities.” 48
The idea that any threat of inflation must be suppressed is the only
one that is legitimate in contemporary mainstream economic theory—
and practice. That consensus helps sustain low inflation policies and,
more importantly, serves to undermine policies that might deviate from
the norm. The evidence supports the contention, however, that the ag-
gregate economic consequences of most levels of inflation are modest,
ambiguous, and certainly dwarfed by its differential effects. 49
CAPITAL MOBILITY: IN WHOSE INTEREST ?
If inflation fighting dominates macroeconomic policy at the domestic
level, the deregulation of capital flows tops the international agenda.
Once again, however, the same combination can be observed—self-
432 WORLD POLITICS
47 It bears repeating that the ultimate resolution of the economic debate over optimal inflation pol-
icy is of small concern to students of politics, given the modest stakes. The purpose of this discussion
is not to champion one policy over another but rather to illustrate that more than one policy is theo-
retically plausible, that the perception of legitimacy can be a crucial factor in determining which pol-
icy is chosen, and that the differential effects of each easily outweigh the difference in their aggregate
economic consequences.
48 Posen also shows a correlation between the strength of the financial sector and the degree of cen-
tral bank independence. See Adam Posen, “Declarations Are Not Enough: Financial Sector Sources of
Central Bank Independence,” NBER Macroeconomics Annual 10 (1995), 254, 256, 264; idem, “Why
Central Bank Independence Does Not Cause Low Inflation: There Is No Institutional Fix For Poli-
tics,” in Richard O’Brien, ed., Finance and the International Economy 7 (1993), esp. 48.
49 Studies that have explored the differential effects of low inflation and tight monetary policies in-
clude G. J. Santoni, “The Effects of Inflation on Commercial Banks,” Federal Reserve Bank of St. Louis
Review (March 1986); T. F. Cargill and M. M. Hutchison, “The Federal Reserve and the Bank of
Japan,” in Thomas Mayer, ed., The Political Economy of American Monetary Policy (Cambridge: Cam-
bridge University Press, 1990), 172–73; Gerald Epstein and Juliet Schor, “Corporate Profitability as a
Determinant of Restrictive Monetary Policy: Estimates for the Postwar United States,” in Mayer;
tics. And if other economic policies—in this instance, some regulation
of capital flows—are sound, plausible, and sustainable from an eco-
nomic perspective (absent problems arising solely from the perception of
legitimacy), then an explanation for the choice of one policy over another
must be rooted in political analysis, rather than in economic theory.
The idea that capital flows should not be regulated is more than just
self-fulfilling (though that is of course profoundly consequential); it is
also the express policy of both powerful states like the United States
and the international institutions that are supposed to oversee the
smooth functioning of the global economy. The support for and the
salience of the idea of freeing capital gathered momentum in the 1990s.
In the wake of this trend, the International Monetary Fund embarked
upon a fundamental revision of its charter, announcing plans in May
1997 to amend its constitution—the Articles of Agreement—“to make
the promotion of capital account liberalization a specific purpose of the
IMF and give it jurisdiction over capital movements.” 50 This would be a
dramatic change—in fact, the very opposite of what the founding fathers
of the IMF intended. They thought that capital controls were necessary
to assure the smooth functioning of an open international economy.
Thus, the Bretton Woods era, the “golden age of capitalism,” was a pe-
riod of ubiquitous capital control. Now, however, the IMF has asserted
that capital liberalization is the only legitimate path to economic effi-
ciency, and it has explicitly proclaimed that “forces of globalization
must be embraced.” Its new policy has been repeatedly characterized as
a proposition “to make unrestricted capital flows a condition of mem-
bership in the global economy.”51
As with very low inflation, there are good deductive reasons to be-
lieve in the elimination of capital controls. Openness to capital inflows
expands the resources available to the local economy, and the elimina-
tion of restrictions on capital outflows gives foreigners the confidence
to invest. Not only are investors confident that they will be able to repa-
triate their profits, but states that allow unrestricted capital flows enjoy
greater credibility: market actors assume that they are more likely to
STUDY OF MONEY 433
Jeffry Frieden, “Monetary Populism in Nineteenth Century America: An Open Economy Interpreta-
tion,” Journal of Economic History 57 ( June 1997).
50 “IMF Wins Mandate to Cover Capital Accounts,” IMF Survey (May 12, 1997), 131–32.
51 “Forces of Globalization Must Be Embraced,” IMF Survey (May 26, 1997), 131; Darren Mcder-
mott and Leslie Lopez, “Malaysia Imposes Sweeping Currency Controls: Such Capital Restrictions
Win Credence in Wake of Financial Turmoil,” Wall Street Journal, September 2, 1998; G. Pierre Goad,
“Acceptance of Capital Controls Is Spreading,” Asian Wall Street Journal, September 2, 1998, “condition
of membership” quotes.
subject to hemorrhaging of both foreign and domestic capital. More
generally, free capital seems to follow the logic of free trade—few deny
that an open market leads to goods results in a more efficient allocation
of resources, expanded consumption choices, and a host of other bene-
fits such as the discipline imposed by international competition.
But again, as with inflation, there are competing deductive argu-
ments that suggest that some positive level of capital control is optimal
for achieving economic efficiency. 52 The free flow of capital differs in
important ways from the free flow of goods, just like Cohen’s monetary
oligopolists differ from oligopoly producers in the real economy. Two
attributes make capital quite distinct from most real goods. First, con-
temporary technology allows investors to move huge amounts of
money almost instantaneously and at very little cost. Second, to an im-
portant extent, financial assets are worth what people think they are
worth. Given these elements, fears regarding what other people are
thinking can cause herding behavior, unleashing financial stampedes
with economic consequences that veer far from the path suggested by
any reading of the economic “fundamentals.”
Additionally, in a world of perfectly mobile capital, investors can
scan the globe for the best rates of return, and this creates pressure for
conformity across countries’ macroeconomic policies. But it is highly
unlikely that all states should be pursuing the same macroeconomic
policies at any given moment. On the contrary, because states face di-
verse economic conditions, they need to tailor their economic policies
accordingly. But without any restrictions on capital, governments that
deviate from the international norm, even when pursuing policies ap-
propriate for local needs, are “punished” by capital flight and are often
forced to abandon or even reverse such policies.
In this instance, competing deductive arguments have not been fol-
lowed by a trove of empirical studies ready for mining. Jagdish Bhag-
wati, noted champion of free trade, recently took many of his fellow
economists to task for simply assuming the case for unregulated capital.
Proponents of free trade, he observes, have provided mountains of evi-
dence to support their claims; the supporters of free capital have not. If
fact, he concludes, “the weight of evidence and the force of logic point
434 WORLD POLITICS
52 Once again, it is important to note the qualified nature of this argument. The competing argu-
ment is not that capital flows are bad but rather that completely deregulated capital would lead to a
suboptimally high level of flows.
challenge is only reinforced by the recent study of Dani Rodrik, whose
analysis from a sample of one hundred countries finds “no evidence that
countries without capital controls have grown faster, invested more, or
experienced lower inflation.”54
Skepticism about the benefits of unlimited capital mobility would
appear to make more sense with the unexpected spread and depth of
the Asian financial crisis. Moreover, efforts by many states to defend
their currencies in an environment of mobile capital required deflation-
ary measures that only exacerbated economic distress, while countries
that had retained their capital controls were largely spared. And the cri-
sis was, to say the least, unanticipated. In September 1996 the IMF as-
serted that “international capital markets appear to have become more
resilient and are less likely to be a source of disturbances.”55 As late as
May 1997 the managing director of the IMF remarked that “global eco-
nomic prospects warranted ‘rational exuberance.’” In addition, eco-
nomic prospects were “bright” and “overheating pressures have abated
in many emerging market economies, especially in Asia—where
growth has stayed strong for several years.”56
But the IMF’s retrospective analyses of the crisis make clear that it has
not been shaken in its beliefs but remains focused on the domestic
sources of the crisis and highly suspicious of any forms of capital con-
trol. 57 However sincerely those ideas may be held, given the muddled
message yielded by the economic arguments, greater attention must be
STUDY OF MONEY 435
53 Jagdish Bhagwati, “The Capital Myth,” Foreign Affairs 77 (May–June 1998), 9, 12. For further
skepticism and qualifications, see Richard N. Cooper, “Should Capital Controls Be Banished?” Brook-
ings Papers on Economic Activity 99:1 (1999).
54 Dani Rodrik, “Who Needs Capital Account Convertibility?” in Should the IMF Pursue Capital Ac-
count Convertibility? Essays in International Finance, no. 207 (Princeton: International Finance Sec-
tion, Princeton University, May 1998), 61.
55 IMF Survey (September 23, 1996), 294. Under the headline “International Capital Markets Chart-
ing a Steadier Course,” the fund also noted that “although the scale of financial activity continues to
grow, market participants—including high-risk high-return investment funds—are more disciplined,
cautious, and sensitive to market fundamentals” (p. 293).
56 IMF Survey (May 12, 1997), 129–30.
57 International Monetary Fund, International Capital Markets: Developments, Prospects, and Key Pol-
icy Issues (Washington, D.C.: IMF , September 1998), esp. 6, 11, 57, 63, 73, 148–50; see also Interna-
tional Monetary Fund, World Economic Outlook: Financial Turbulence and the World Economy
(Washington, D.C.: IMF , October 1998), esp. 6–18, 101–2. It should be noted, however, that in the
wake of the crisis the World Bank has been willing at least to address the issue of the possible benefits
of some control over short-term capital flows. See World Bank, Global Economic Prospects and the De-
veloping Countries, 1998–99: Beyond Financial Crisis (Washington, D.C.: World Bank, 1999), esp. xi-
xii, xxi, 4, 123–24, 128, 142–52; see also World Bank, East Asia: The Road to Recovery (Washington,
D.C.: World Bank, 1998), esp. 9–10, 16, 34.
dfs3434