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The Volatility Machine: Emerging Economies and the Threat of Financial Collapse

Author

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  • Pettis, Michael

    (Columbia University)

Abstract

This book presents a radically different argument for what has caused, and likely will continue to cause, the collapse of emerging market economies. Pettis combines the insights of economic history, economic theory, and finance theory into a comprehensive model for understanding sovereign liability management and the causes of financial crises. He examines recent financial crises in emerging market countries along with the history of international lending since the 1820s to argue that the process of international lending is driven primarily by external events and not by local politics and/or economic policies. He draws out the corporate finance implications of this approach to argue that most of the current analyses of the recent financial crises suffered by Latin America, Asia, and Russia have largely missed the point. He then develops a sovereign finance model, analogous to corporate finance, to understand the capital structure needs of emerging market countries. Using this model, he finally puts into perspective the recent crises, a new sovereign liability management theory, the implications of the model for sovereign debt restructurings, and the new financial architecture. Bridging the gap between finance specialists and traders, on the one hand, and economists and policy-makers on the other, The Volatility Machine is critical reading for anyone interested in where the international economy is going over the next several years.

Suggested Citation

  • Pettis, Michael, 2001. "The Volatility Machine: Emerging Economies and the Threat of Financial Collapse," OUP Catalogue, Oxford University Press, number 9780195143300.
  • Handle: RePEc:oxp:obooks:9780195143300
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    References listed on IDEAS

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    Cited by:

    1. Chang Woon Nam, 2008. "What Happened to Korea Ten Years Ago?," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 9(4), pages 69-73, December.
    2. Klaus Abberger & Biswa Nath Bhattacharyay & Chang Woon Nam & Gernot Nerb & Siegfried Schönherr, 2014. "How Can the Crisis Vulnerability of Emerging Economies Be Reduced?," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 65, October.
    3. Geoff Willis, 2011. "Why Money Trickles Up - Wealth & Income Distributions," Papers 1105.2122, arXiv.org, revised May 2011.
    4. Brad Setser & Ioannis Halikias & Alexander Pitt & Christoph B. Rosenberg & Brett E. House & Jens Nystedt & Christian Keller, 2005. "Debt-Related Vulnerabilities and Financial Crises," IMF Occasional Papers 240, International Monetary Fund.
    5. Anastasia Nesvetailova, 2012. "Liquidity Illusions in the Global Financial Architecture," Chapters,in: Research Handbook on International Financial Regulation, chapter 15 Edward Elgar Publishing.
    6. Ross P. Buckley & Peter Dirou, 2006. "How to Strengthen the International Financial System by Restructuring Sovereign Balance Sheets," Annals of Economics and Finance, Society for AEF, pages 257-269.
    7. Vestergaard, Jakob, 2009. "More heat than light: On the regulation of international finance," economic sociology_the european electronic newsletter, Max Planck Institute for the Study of Societies, pages 6-10.
    8. Chirathep Senivongs na Ayudhya & Pornvipa Tangcharoenmonkong & Thitima Chucherd, 2003. "Balance Sheets and Economic Recovery," Working Papers 2003-01, Monetary Policy Group, Bank of Thailand.
    9. Sergio Godoy, 2005. "Emerging Market Spreads at the Turn of The Century: A Roller Coaster Sergio Godoy," Working Papers Central Bank of Chile 339, Central Bank of Chile.
    10. Radygin Alexandr & Entov Revold & Mejeraoups I., 2007. "External Mechanisms of Corporate Governance," Research Paper Series, Gaidar Institute for Economic Policy.

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