Money, Banking, and Financial Markets

Book Description

Stephen Cecchetti’s new text on Money and Banking offers a fresh, more modern, and more student-friendly approach to the subject. The author has drawn on his vast experience as Vice President at the Federal Reserve Bank of New York, publishing in and editing various journals, and consulting for the European Central Bank, the Bank of England, the Bank of Israel, and the Reserve Bank of Australia as well as his years of teaching at various schools including Ohio State, Brandeis, Princeton, and Oxford University. Students will find the material more relevant and interesting because of the book’s unique emphasis on the Five Core Principles, the early introduction of risk, and an integrated global perspective. Cecchetti is THE money and banking book for today’s students; by focusing on the big picture via core principles, Cecchetti teaches students the rationale for financial rules and institutional structure so that even when the financial system evolves, students’ knowledge will not be out of date.

Customer Reviews:

Macroeconomics As Seen From The Fed .......2006-05-28

This is an excellent undergraduate text on financial institutions and monetary economics. The exposition is rigorous yet avoids abstruse math. The best part is the section on monetary economics, where the author dispenses with IS/LM analysis and instead directly analyzes aggregate supply and demand. He writes from the perspective of a central banker (which he was), showing how central banks use interest rates to influence inflation and output. The writing is quite clear, and the numerous sidebars on historical and contemporary issues are excellent. Although some subjects (such as exchange rates) could have been developed in greater depth, this is a great textbook overall.

Ideological footnote: Many undergraduate econ books assume (more or less explicitly) that disturbances in the macroeconomy are eventually self-correcting. This book has a somewhat different starting place: it takes it for granted that regulators will oversee the banking system and that central bankers will act to close output gaps and keep inflation under control (in fact, the latter assumption is built into the author's construction of the aggregate demand curve). According to the author, modern central banks have developed a fairly good understanding of business cycles and know how to moderate them through the use of monetary instruments. Let's hope he's right.

Well written and with clarity.......2005-08-08

I've read the books of Mishkin and Hubbard, also well written pieces.

However, Cecchetti seems to be able to explain concepts with more clarity and in a way that makes one remember the various theories long after reading the book.

He should try to develop further the chapter on futures and give more emphasis on hedging, since this is the trend financial markets are moving towards these days, without having to impinge on books devoted solely to the topic.

He may also want to expound more on the chapter covering foreign exchange and international markets, to make the book more relevant to international readers.

on the chapter on monetary policy, since he touched on foreign central banks he may also wish to write about how other countries implement monetary policy, esp how the Bank of England uses the repo market to conduct money easing/contraction.

Am looking forward to a much-improved version in the future.

Financial Institutions, Markets, and Money

Average customer rating:

Great, well-organized
A good starting point for business and finance students

Financial Institutions, Markets, and Money
David S. Kidwell , David W. Blackwell , David A. Whidbee , and Richard L. Peterson
Manufacturer: Wiley
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Accessories:

Study Guide to accompany Financial Institutions, Markets and Money, 9th Edition

ASIN: 0471697575

Book Description

Ever wonder how interest rates are determined?
Would you like to know how to read actual financial data?
Want to know what makes the financial sector really tick?
You'll find answers to these questions and more in Kidwell, Blackwell, Whidbee, and Peterson's Ninth Edition of Financial Institutions, Markets, and Money. Featuring a strong emphasis on fundamental concepts and how things really work in a market context, these four expert authors present a balanced, up-to-date overview of the U.S. financial system and its primary institutions and markets, coupled with an introduction to international markets.
Examine the financial system from a real-world perspective.
Now revised and updated, this Ninth Edition reflects recent events and trends in the financial system. The new edition includes even more real-world, hands-on examples, as well as new "In Practice" boxes, which describe important issues and trends in business practice. You'll also learn how to read and interpret actual financial data.
Take a balanced look at institutions and markets.
The authors present balanced coverage of the U.S. financial system with strong emphasis on both institutions and markets. Throughout, they take a free-market approach to the analysis of economic, market, and regulatory issues.
Understand how the material relates to your life and career.
Financial Institutions, Markets, and Money, Ninth Edition is written specifically for students. The authors have a knack for explaining difficult concepts in an intuitive manner, without watering the material down. In addition, there are a number of examples related to the types of finance transactions that young professionals face, such as buying and financing a home or determining the rate of return on an investment.

Customer Reviews:

Great, well-organized.......2006-11-07

This study guide is quite useful for a student studying finance first time.

A good starting point for business and finance students.......2001-03-28

This book is updated to the latest development in financial market, institutions and structure.

It concisely presented the money and capital markets with a touch of history and functionality.

I particularly like the balanced view of the authors in their presentations. It successfully illustrates the functional as well as risk consideration of the markets and institutions.

Book Description

The Bank for International Settlements is only 1-2 years away from effectively requiring all major financial institutions in the world to use a sophisticated credit models. The most widely used model is based on the 1974 Merton model of risky debt. A more recent extension of the Merton model of risky debt is the Shimko, Tejima and van Deventer (1993) model, which allows for simultaneous analysis of credit risk and interest rate risk.

Increasingly, however, bankers are turning to a newer class of models called "reduced form credit models" because of their analytical power for both complex derivatives like credit derivatives and the mark to market of loans on a credit adjusted basis.

The Basel Capital Accords place a heavy emphasis on financial institutions' ability to assess credit risk. In this book, two of the world's best-known risk management experts assess both the Merton model and reduced form credit models and show exactly how to measure model performance as the Basel Accords require. They use the same tests to assess the likely effectiveness of the Basel Capital Accords in measuring the safety and soundness of financial institutions.

The authors go into great detail in assessing the ability of leading credit models to evaluate collateralized debt obligations, loan commitments, collateralized loans, as well as retail and small business loan portfolios.

Credit Risk Models and the Basel Accords reviews the objectives of the credit risk management process, introduces the theory of the Merton and reduced form credit models, shows how the models can be used in practice, and then examines a wide range of historical data to show the relative performance of the models in practice.

This book offers a balanced review of the newer reduced form models and the older Merton model. It is an invaluable guide for financial institutions striving to meet the requirements of the new Basel Accord. It is a book that thoroughly reviews the pros and cons of both classes of credit model. The Basel Accords ensure that financial institutions do more than just "have" a model - they must also understand how they work. This book will help to fulfill that requirement of the new Basel Accords.

Currency Derivatives: Pricing Theory, Exotic Options, and Hedging Applications (Wiley Series in Financial Engineering)

Average customer rating:

Excellent choice of papers!
Comprehensive

Currency Derivatives: Pricing Theory, Exotic Options, and Hedging Applications (Wiley Series in Financial Engineering)

Manufacturer: Wiley
ProductGroup: Book
Binding: Hardcover

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Similar Items:

Options on Foreign Exchange (Wiley Series in Financial Engineering)
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Dynamic Hedging: Managing Vanilla and Exotic Options (Wiley Finance)
FX Options and Structured Products (The Wiley Finance Series)
mastering foreign exchange & currency options: a practical guide to the new marketplace (2nd Edition) (Financial Times Series)

ASIN: 0471252670

Book Description

A groundbreaking collection on currency derivatives, including pricing theory and hedging applications.

"David DeRosa has assembled an outstanding collection of works on foreign exchange derivatives. It surely will become required reading for both students and option traders."-Mark B. Garman President, Financial Engineering Associates, Inc. Emeritus Professor, University of California, Berkeley.

"A comprehensive selection of the major references in currency option pricing."-Nassim Taleb. Senior trading advisor, Paribas Author, Dynamic Hedging: Managing Vanilla and Exotic Options.

"A useful compilation of articles on currency derivatives, going from the essential to the esoteric."-Philippe Jorion Professor of Finance, University of California, Irvine Author, Value at Risk: The New Benchmark for Controlling Market Risk.

Every investment practitioner knows of the enormous impact that the Black-Scholes option pricing model has had on investment and derivatives markets. The success of the theory in understanding options on equity, equity index, and fixed- income markets is common knowledge. Yet, comparatively few professionals are aware that the theory's greatest successes may have been in the derivatives market for foreign exchange. Perhaps this is not surprising because the foreign exchange market is a professional trading arena that is closed virtually to all but institutional participants. Nevertheless, the world's currency markets have proven to be an almost ideal testing and development ground for new derivative instruments.

This book contains many of the most important scientific papers that collectively constitute the core of modern currency derivatives theory. What is remarkable is that each and every one of these papers has found its place in the real world of currency derivatives trading. As such, the contributing authors to this volume can properly claim to have been codevelopers of this new derivatives market, having worked in de facto partnership with the professional traders in the dealing rooms of London, New York, Tokyo, and Singapore.

The articles in this book span the entire currency derivatives field: forward and futures contracts, vanilla currency puts and calls, models for American exercise currency options, options on currencies with bounded exchange rate regimes, currency futures options, the term and strike structure of implied volatility, jump and stochastic volatility option pricing models, barrier options, Asian options, and various sorts of quanto options.

Customer Reviews:

Excellent choice of papers!.......2001-08-18

DeRosa has picked excellent papers. If one reads the papers in detail, the currency derivatives literature, as well as related derivatives literature, becomes very easy to understand.

Comprehensive.......1999-06-19

This book presents highly technical papers on diverse topics from variuous academics. It would be very helpful to anyone looking to understand theoretical aspects of FX derivatives. Since most papers are written by different authors, notation is not consistent. In addition, academics do not always write like Hemingway. Nevertheless, the book covers everyhting from vanillas to exotics very well.

An Introduction to Financial Markets and Institutions

Average customer rating:

An Introduction to Financial Markets and Institutions
Maureen Burton , Reynold F. Nesiba , and Raymond Lombra
Manufacturer: South-Western College Pub
ProductGroup: Book
Binding: Hardcover

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The Entrepreneurial Adventure: A History of Business in the United States

ASIN: 0324066961

Book Description

This text contains the strengths of the authors' money and banking text: they bring in a historical and evolutionary perspective, provide a global emphasis where appropriate, and cover all the topics common to traditional markets and institutions texts. In addition, they emphasize a flow-of-funds perspective and the text ends with a section on monetary policy. The text provides balanced coverage of the theories, policies, and institutions in a conversational style, avoiding complex models and high level mathematics, making it a student-friendly text with many unique features that offer additional explanation of concepts, analyses, and historical background. The text emphasizes how structural change, globalization, innovation, and technology affect the financial environment, with attention to how and why institutions and markets evolve.

Forex Revolution: An Insider's Guide to the Real World of Foreign Exchange Trading (Financial Times Prentice Hall Books)

Average customer rating:

Good Introduction
AWESOME! THE BEST PLACE TO START!
You're better off reading something else...
Good Introduction to the Forex Market!
Solid Basics

Forex Revolution: An Insider's Guide to the Real World of Foreign Exchange Trading (Financial Times Prentice Hall Books)
Peter Rosenstreich
Manufacturer: FT Press
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Binding: Hardcover

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Getting Started in Currency Trading: Winning in Todays Hottest Marketplace (Getting Started In.....)
ForeX Trading for Maximum Profit: The Best Kept Secret Off Wall Street
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Forex Made Easy : 6 Ways to Trade the Dollar
Technical Analysis of the Currency Market: Classic Techniques for Profiting from Market Swings and Trader Sentiment (Wiley Trading)

ASIN: 013148690X

Customer Reviews:

Good Introduction .......2007-09-01

We recommend this book to our clients who want to learn more about global currency markets. It gives a great introductory overview and history of currency. Brief and well written.

AWESOME! THE BEST PLACE TO START!.......2006-08-28

Starts from the very basics. This is the first book I ever read on Forex. Got me off to a running start!

You're better off reading something else..........2006-07-10

So many editorial reviews on Amazon are so far off the mark...and this book is no exception. Poorly written, poorly edited and of course poorly priced. The author spends too much time on his personal observations, which are highly subjective of course, but devoid of the poignancy that would justify such missives. He then moves quickly from one topic to the next, explaining none in sufficient detail.

Much of what he writes isn't very important to a trader and is probably obvious to a student of financial markets. Laypeople will learn something about the world of forex, but this cursory treatment lacks focus. They are better off reading a few focused books. The few pages devoted to interviews from successful traders were informative, but I found myself disagreeing with some of the "facts" (read: opinions) offered up. If you must buy this book, take what is written here with a grain of salt. Then go buy a serious book on the stucture of the foreign exchange market, on risk management and on trading strategies.

This book will not make you a better trader and it certainly isn't worth the price.

Good Introduction to the Forex Market!.......2006-05-02

This book definately gives the reader a good look at the intricacies of the Forex, but it is not the final step in your education of the Forex market. The Forex market is a world unto itself and by nature is a huge gamble for a private investor. This book is a great place to start. The author uses good examples to illustrate his points and doesn't assume the reader has a thorough understanding of macroeconomics.

Solid Basics.......2006-01-16

Author Peter Rosenstreich's short, concise guide is a neophyte's introduction to the world of foreign exchange trading. Its chief virtue is that it warns against trading if you don't have a strategy and some level of technology. Its chief vice is the suggestion that it is realistic for individual investors to expect to make money in the foreign exchange markets. The author cautions against the risks of the market (and gives good advice on spotting the most egregious frauds), but even to suggest that an individual retail trader equipped with an Internet connection, a news feed, a research source and a charting service can hope to succeed in Forex investing is a bit misleading. Perhaps, it would have been more enlightening if the author had discussed the competition that confronts the potentially foolhardy neophyte, in terms of equipment, technology and expertise. That said, readers will gain an elementary - but not really an insider's - acquaintance with the ABCs of the Forex markets and will learn the names of key agencies and approaches. We find that the book's most useful attributes include references to further reading that should deter novices from attempting to trade their own money in the foreign exchange markets. For solid basics, read on - but zip your wallet.

Financial Markets, Instruments, and Institutions

Average customer rating:

Precise, Clear and Helpful
One of the best introductions to the subject
pity they cannot comunicate
Fantastic
One of the worst written books on the subject

Financial Markets, Instruments, and Institutions
Anthony M. Santomero , and David Babbel
Manufacturer: McGraw-Hill/Irwin
ProductGroup: Book
Binding: Hardcover

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ASIN: 0072358688

Book Description

Financial Markets, Instruments and Institutions, 2/e offers a perspective that centers on the function, pricing and institutional structure of the financial markets. It focuses on these areas because financial markets, instruments and institutions have undergone substantial change over the last decade. Santomero/Babbel covers the wide range of financial instruments and the structure of financial markets and institutions, issues not addressed by traditional “Money and Banking” books. Santomero/Babbel also includes valuation and pricing methodologies, issues avoided by lower level “Money and Capital Markets” books.

Customer Reviews:

Precise, Clear and Helpful.......2001-01-13

The authors not only demonstrate their understanding of financial markets by way of the breadth and precision of the topics discussed, but they also present the material in a way that is understandable to even those uninitiated in finance. If you are looking to learn the basic concepts underlying the various markets (equity, bond, mortgage, etc.), and you are interested by the wide range of pricing tools available today, this book is up your alley.

One of the best introductions to the subject.......2000-11-22

This is one the best introductory textbooks on the subject of financial markets and institutions. It is comprehensive and full of examples and exercises. The authors do an excellent job of presenting complex concepts in a relatively simple and straightforward style. Highly recommended.

pity they cannot comunicate.......2000-02-22

clearly written by a pair of highly intelligent intellectuals. it is a pity they cannot comunicate.

Fantastic.......1999-06-09

This book is brilliantly written by obviuosly two bright intellectuals. They bring a unmatched insight into the financial market world.

One of the worst written books on the subject.......1999-01-10

The idea to have a broad but thorough overview of different financial markets is brilliant. However, the author has real talent to make relatively simple ideas incomprehensible. Overall, the book is very difficult to read, language and wording are terrible.

And the Money Kept Rolling In (and Out): Wall Street, the IMF, and the Bankrupting of Argentina

Average customer rating:

A wonderful look at how an economy collapsed
Objective chronicle of a nation's collapse
Another Winner from Blustein
Economics of Debt
Argentina's Wild Ride

And the Money Kept Rolling In (and Out): Wall Street, the IMF, and the Bankrupting of Argentina
Paul Blustein
Manufacturer: PublicAffairs
ProductGroup: Book
Binding: Hardcover

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The Chastening: Inside the Crisis That Rocked the Global Financial System and Humbled the Imf
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Bailouts or Bail-Ins: Responding to Financial Crises in Emerging Markets

ASIN: 1586482459
Release Date: 2005-03-01

Amazon.com

It's not often--or maybe ever--that a book steeped in emerging-market economic theory reads like a thriller. But And the Money Kept Rolling In (and Out) has cliffhangers and plot twists equal to a detective's tale, as Paul Blustein chronicles the spectacular rise and fall of Argentina's economy at the turn of the 21st century. The book has its flaws, of course, including the author's insistence on using goofy metaphors from the overripe Andrew Lloyd Webber musical Evita (from which the book takes its awkward title). But by and large, Blustein, a staff writer at the Washington Post, tells a cynic's tale of greed run amok on a massive scale.

While policy wonks at the International Monetary Fund had much to do with Argentina's implosion, Blustein also holds the country's own government responsible. Conventional wisdom says that the influence of the world's investors keeps everyone in line--a key tenet of the pro-globalization argument--but in practice, Blustein writes, "foreign funds numbed Argentine policymakers into minimizing the perils of their policies. The effect was similar to a dose of steroids, giving the economy a short-term boost while insidiously increasing the risk of a breakdown in the long run." From that point on, only devastation lay ahead for many average Argentineans, who could no longer remove savings from their banks, and for international investors, who saw their returns vanish in a flash. Blustein effectively makes the case that Argentina wasn't a rare example or a perfect storm of problems, but--bearing "striking parallels" to Enron and other financial scandals of the era--a preview of more meltdowns to come. It's a compelling cautionary tale well worth telling. --Jennifer Buckendorff

Book Description

The dramatic, definitive account of the most spectacular economic meltdown of modern times exposes the dangerous flaws of our global financial system.

In the 1990s, few countries were more lionized than Argentina for its efforts to join the club of wealthy nations. Argentina's policies drew enthusiastic applause from the IMF, the World Bank and Wall Street. But the club has a disturbing propensity to turn its back on arrivistes and cast them out. That was what happened in 2001, when Argentina suffered one of the most spectacular crashes in modern history. With it came appalling social and political chaos, a collapse of the peso, and a wrenching downturn that threw millions into poverty and left nearly one quarter of the workforce unemployed.

Paul Blustein, whose book about the IMF, The Chastening, was called "gripping, often frightening" by The Economist and lauded by the Wall Street Journal as "a superbly reported and skillfully woven story," now gets right inside Argentina's rise and fall in a dramatic account based on hundreds of interviews with top policymakers and financial market players as well as reams of internal documents. He shows how the IMF turned a blind eye to the vulnerabilities of its star pupil, and exposes the conduct of global financial market players in Argentina as redolent of the scandals-like those at Enron, WorldCom and Global Crossing- that rocked Wall Street in recent years. By going behind the scenes of Argentina's debacle, Blustein shows with unmistakable clarity how sadly elusive the path of hope and progress remains to the great bulk of humanity still mired in poverty and underdevelopment.

Customer Reviews:

A wonderful look at how an economy collapsed.......2007-07-09

This book seeks to understand how and why Argentina sank into financial chaos in the early 2000's. The book looks at the role of the IMF, US treasury, private markets, and the Argentinean government in the overall downfall of the country. The author writes very well about his subject and has a good understanding of international economics. The IMF is not completely vilified as it is in many of the current financial crisis's and although it shares a large amount of the blame the book hands it out equally. There is quite a bit of conspiracy theory and engaging in theories behind the IMF and Wall Street as well as the Bush administration. The author acknowledges in most cases that these are conspiracies but they did not really need to be discussed. The most interesting part of the story has to do with the role that the markets played in Argentina. It is an interesting foreshadow for the future of emerging markets and looking at the self fulfilling prophecies of debt and equity. This book deserves its credit for focusing on real issues without engaging in much ideology or theory. If you want to understand how financial markets are impacting areas overseas this is a great book to start with.

Objective chronicle of a nation's collapse.......2007-06-10

This book examines the economic history of Argentina from the early 20th century to 2004, with an emphasis on the time period from 1989 to 2002. The focus is on the financial sector of the economy, and how actions by the government and international financial institutions first ballooned Argentina's economy over a decade, and then collapsed it in just under 2 years. The point of view is from the top, as the book follows multiple important figures throughout this time, including officials at the IMF, officials in Argentina's government, and financial bigwigs in the US and Europe, both public and private.

The author is quite objective and impartial, and lays blame all around. The IMF gets some blame for not being more forceful in getting Argentina to change its ways. International banks and lenders get blame for contributing willingly to the financial bubble of the country. And the Argentinan government gets blame for refusing to consider floating its currency, devaluing it, or restructuring its debt before it was too late. Unfortunately, it was the citizens, mainly poor and middle class, of Argentina who took it in the pocketbooks. All in all a great book, with equal emphasis on economics, public policy, and historical analysis. I highly recommend this book.

Another Winner from Blustein.......2006-10-15

Paul Blustein may have have created a new genre: the real-life financial crisis thriller. Having dissected the Asian financial crisis in "The Chastening," he now turns to Argentina in "And the Money Kept Rolling in (and Out)." The book tells the fascinating story of how Argentina, after being lionized as the poster child of free market reform in the early 1990s, became hooked on foreign debt that ballooned far faster than its ability to service it. The outcome was default and financial ruin in 2001-02, with vast economic hardship for the Argentine population.

As in "The Chasterning," Blustein's narrative is clearly-written and based on in-depth interviews with decision-makers in government, the IMF, and the financial community. He takes aim at perverse institutional incentives and herd-behavior among investors who poured money into Argentina long after it was clear that the country couldn't pay its bills. This profligacy encouraged an attitude of policy-complacency in Buenos Aires that made the final reckoning all the more painful for foreign bond-holders and Argentines alike. Highly recommended.

Economics of Debt.......2006-09-18

This was a very interesting book about the IMF and its dealing with Argentina. Argentina has had a colorful past of financial blunders including one in 1890 which almost brought down Barings Bank when it defaulted on its bond payments. So it was not surprising when Argentina bankrupted again.

Not only does this book have the inner workings of the IMF with regard to Argentina but it also contains some short stories of average people and the catastrophies that befell them because of Argentina's currency devaluation. I found it interesting that because Argentina guaranteed an exchange rate between its currency and the dollar that a lot of people had taken out loans in dollars which proved to be disasterous when the peso was devalued.

All the information about the behind the scenes action of the IMF was very insightful as to the inner workings of global financing of emerging nations. The author did a good job bringing home the facts and helping the reader get to know the players in both the IMF and the Argentine government. In summary this was a good lesson on the economics of what debt can do to a country.

Argentina's Wild Ride.......2006-08-07

A fast paced enjoyable read. Paul Blustein tells the story of the rise and fall of Argentina's economy in the roiling seas of free trade and free markets of the nineties in the style of a novel. His behind the scenes look at the International Monetary Fund were very elightening and throughly entertaining.

Motives and ambitions of leaders are not always spelled out when reading about the fits and starts of South American economies like Argentina in the North American press, but reading this book sheds bright light on thinking and actions of dicision makers as they explain thier actions.

Entertaining and informing.

Bailouts or Bail-Ins: Responding to Financial Crises in Emerging Markets

Average customer rating:

One of the best....

Bailouts or Bail-Ins: Responding to Financial Crises in Emerging Markets
Nouriel Roubini , and Brad Setser
Manufacturer: Peterson Institute
ProductGroup: Book
Binding: Paperback

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The Chastening: Inside the Crisis That Rocked the Global Financial System and Humbled the Imf
And The Money Kept Rolling In (And Out): Wall Street, The IMF, and The Bankrupting of Argentina
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Assessing Financial Vulnerability : An Early Warning System for Emerging Markets
The Euro at Five: Ready for a Global Role

ASIN: 0881323713

Book Description

Roughly once a year, the managing director of the International Monetary Fund, the U.S. treasury secretary and in some cases the finance ministers of other G-7 countries will get a call from the finance minister of a large emerging market economy. The emerging market finance minister will indicate that the country is rapidly running out of foreign reserves, that it has lost access to international capital markets and, perhaps, that is has lost the confidence of its own citizens. Without a rescue loan, it will be forced to devalue its currency and default either on its government debt or on loans to the country's banks that the government has guaranteed. This book looks at these situations and the options available to alleviate the problem. It argues for a policy that recognizes that every crisis is different and that different cases need to be handled within a framework that provides consistency and predictability to borrowing countries as well as those who invest in their debt.

Customer Reviews:

One of the best...........2007-02-24

I don't know where to begin with this review, but I just wanted to say this is one of the best books on the subject and anyone interested in global economics and markets should read this book.

Financial Statecraft: The Role of Financial Markets in American Foreign Policy

Average customer rating:

TERRIBLE
Too little on actual financial statecraft
Capital Markets Sanctions: A Very Stupid Idea Whose Time Has Come

Financial Statecraft: The Role of Financial Markets in American Foreign Policy
Benn Steil , and Robert E. Litan
Manufacturer: Yale University Press
ProductGroup: Book
Binding: Hardcover

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ASIN: 030010975X

Book Description

As trade flows expanded and trade agreements proliferated after World War II, governments—most notably the United States—came increasingly to use their power over imports and exports to influence the behavior of other countries. But trade is not the only way in which nations interact economically. Over the past two decades, another form of economic exchange has risen to a level of vastly greater significance and political concern: the purchase and sale of financial assets across borders. Nearly $2 trillion worth of currency now moves cross-border every day, roughly 90 percent of which is accounted for by financial flows unrelated to trade in goods and services—a stunning inversion of the figures in 1970. The time is ripe to ask fundamental questions about what Benn Steil and Robert Litan have coined as “financial statecraft,” or those aspects of economic statecraft directed at influencing international capital flows. How precisely has the American government practiced financial statecraft? How effective have these efforts been? And how can they be made more effective? The authors provide penetrating and incisive answers in this timely and stimulating book.

Customer Reviews:

TERRIBLE.......2007-01-21

Very naive - these guys need to work harder before publising. Some terrible naive comments - reads like a bad essay at university and perhaps even high school. waste of money... Terrible stuff a shame that anyone published this.

Too little on actual financial statecraft.......2006-05-07

I must respectfully disagree with the esteemed reviewers of this book listed above. I expected so much more from a book with such a fine pedigree (Brookings and the US Council on Foreign Relations).

The topic of how states use financial instruments towards their foreign policy goals is an area which certainly requires more understanding. As such, I expected this book to be an in-depth study of the various ways states have used such tools, and how the authors expect such tools to be used in the future. I thus expected analyses of topics such as how states respond to currency crises of allies and enemies and how states use counterfeiting of enemies' currencies as foreign policy (i.e. as Iran is alleged to do with the US dollar). I also expected a study of how states manipulate access to important currencies (as when the US cut Panama off from receiving dollars as part of an effort to topple Noreiga) and how they have sought to manipulate the foreign financial press (as is alleged to have happened during the classical Gold Standard era).

Some of these topics did receive mention. The issue of how the US should respond to allies' crises received good coverage, especially regarding South Korea. There was also one paragraph acknowledging that countries have counterfeited others' currencies, and a brief discussion of petro-dollar recycling. Moreover, I found the chapter on how interest groups have attempted to restrict access to US capital markets to further other goals very illuminating, and there was a nice summary of anti-terrorism finance legislation. Overall, I found the first half of the book very enlightening.

Unfortunately, the other half of the book dealt predominantly with the authors' assertions that dollarization should be the way forward for developing countries to prevent currency crises, and in particular, that the US should encourage this and absorb some of the costs. The issues of whether countries should use floating, dirty float, pegged or dollarized exchange rates is an important one. However, I did not pick up this book to read about the authors' assertions about dollarization--I picked it up to read about financial statecraft.

Financial statecraft will only grow in importance, and as the authors note, it is critical that policymakers understand how it functions and what tools are at their disposal. This book only discusses financial statecraft primarily in its first 80 pages (and scattered in some places in the latter part of the book as well). I feel eighty pages was just too little to adequately examine financial statecraft. Instead, the reader is unfortunately left with a quick gloss-over of only a few aspects of such an important and under-analyzed topic.

Capital Markets Sanctions: A Very Stupid Idea Whose Time Has Come.......2006-03-09

Steil and Litan define economic statecraft as applying economic means to influence other actors in the international system, and financial statecraft as those aspects of economic statecraft that are directed at influencing capital flows. They cover a wide range of issues, starting from the recycling of petrodollars in the 1970s to the fight against the financing of terrorism after 9/11, with special highlights on financial sanctions against non-state actors and on the foreign policy dimension on financial crises.

Capital market sanctions, the idea of restricting access to the US capital markets in the service of foreign policy aims, are increasingly popular in some quarters, reflecting the growing importance of capital transactions over trade flows. The authors demonstrate that it is also an incredibly stupid idea: money is fungible, and the capital that is not raised in New York can be easily raised elsewhere at the same cost. Even if all major stock markets cooperated to bar access to targeted companies that operate in certain rogue states or participate in arms dealings, the small rise in the cost of capital that these firms would incur would be vastly offset by the gains accrued from these operations.
The authors raise the example of PetroChina, which Congress tried to ban from listing on the New York Stock Exchange because of its involvement in the Sudanese energy sector. The public campaign against the Chinese company assembled a motley crew of activists, ranging from organizations associated with the Christian Right to the AFL-CIO and human rights advocates. In the end, the IPO was scaled down and the campaigners claimed victory, as the AFL-CIO convinced some pension funds not to invest in the Chinese company.

Meanwhile, the share price of PetroChina quadrupled in four years, and Sudan now exports 85% of its oil to China. Interestingly, the main foreign investor in the company is the US mogul Warren Buffet, known for his investment acumen and who acquired 14% of the company through the Hong Kong Stock Exchange, where most of its shares are listed. The idea that foreign firms can raise capital only on Wall Street and that US investors wait at home for them to come is simply wrong.

This book is a reminder that "policymakers frequently apply financial statecraft with a poor understanding of how financial markets actually work, leading to policy actions which are inadequate or which exacerbate the problems they are trying to remedy."

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