Year: 2018
Type: dissertation
Abstract: Why have financial safety nets in emerging market economies expanded dramatically in recent years? This dissertation argues that emerging market economies have increasingly turned to domestic financial safety nets as the politically viable solution to the puzzle of how to combine international financial integration and domestic credit growth with domestic financial stability. Yet the widespread proliferation of state-level financial safety nets was not an inevitable outcome, but a common response by emerging market economies to the general unwillingness of the large financial powers to provide robust international equivalents. Indeed, despite the many emerging market financial crises in the post-Bretton Woods era, international financial safety nets remained weak, or, at best, supplied as global club goods. Yet despite this common motivation and the widespread expansion in financial safety nets, there is significant variation in their size and scope across countries and across time. Three explanatory variables stand out in this regard. First, the geopolitical closeness and relative degree of financial integration with the United States sets the parameters regarding a state's relative access to an international financial safety net. A formal model and anecdotal case study evidence suggests that, all else equal, states with greater access to an international financial safety net face fewer incentives to provision an equivalent domestic financial safety net. Second, the relative degree and pace of democratization, as well as the desire for governments to legitimate their rule via high rates of private credit growth, has pushed governments to supply more expansive financial safety nets. Third, the degree of independence the agent in control of the financial safety net has from political authority has tended to boost financial safety nets. This effect was found to be operative with respect to independent central banks and resolution authorities operating with formal independence (Turkey) or with few effective political constraints (Mexico).
Source: TSpace (University of Toronto)
Author: Michael Gavin
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2808385461