POLI 445 Lecture Notes - Lecture 16: Trilemma, Floating Exchange Rate, Money Supply
30 Jan 2018
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Document Summary
Waves of crises in the 1990s: description of what"s changed and the potential problems, contagion (krugman) In economically advanced countries, capital controls were removed by the 1980s. Fukuyama: "the e(cid:374)d of histo(cid:396)(cid:455)" cold wa(cid:396) e(cid:374)ds. Fukuyama knows time will go on; but the end of the cold war is the end of this ideological struggle where there had been strong counterarguments posed against neoliberal capitalist recommendations from the us and the imf and ibrd. Bretton woods: doubts about sustainability of peg due to, level currency fixed at, us under bretton woods: the value was placed at too high a level vis-a-vis other currencies, and speculators were able to bet against it. Same thing in the 1990s: a country picked a peg, but eventually its currency becomes overvalued, and they need to devaluate - speculative pressure emerges: e. g. mexico, soaring budget deficit (and/or growth of domestic money supply)
