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Lecture 13

SOSC 2800 Lecture 13: Week 13 - Debt and development
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Department
Social Science
Course
SOSC 2800
Professor
Merouan Mekouar
Semester
Fall

Description
SOSC 2800 - Development in Comparative and Historical Perspective January 9 , 2017 Week 13: Debt and development Debt and Bargaining Power • Lenders: industrialized countries, big banks, small banks and international institutions o Control sources of $ o But have different interests • IMF/WB able to unify the lenders • Debtors: unable to exploit their potential power o No collective default o Talks about collective action but no action o Prisoner’s dilemma The Prisoners’ Dilemma The 1990s: another decade of crises. • From Mexico to Malaysia (via Russia, Brazil, Turkey…) • Financial liberalization o New capital flow: securities, stocks and bonds o More fluid: hot money o Nourished a succession of crises • Caused by: o Pegged currency combined with o Dependence on short term capital The Asian Financial Crisis • New kind of crisis: o Originates in the banking system o Unprecedented volumes of capital flows o Unprecedented amount of saving packages SOSC 2800 - Development in Comparative and Historical Perspective January 9 , 2017 o Severe economic and social consequences • Originated in Malaysia, Indonesia, Thailand, South Korea… • Interest rates and short term loans The Asian Financial Crisis • The Moral Hazard
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