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The Political Economy of Global Financial Governance: The Costs of Basle II for Poor Countries

Listed author(s):
  • Stijn Claessens

    (World Bank)

  • Geoffrey R D Underhill

    (University of Amsterdam)

  • Xiaoke Zhang

    (University of Nottingham)

The 1990s financial crises triggered many changes to the design of the international financial system, the so-called international financial architecture. While much affected, developing countries have had very little influence on the changes, which the formulation of the new Basle capital accord (B-II) illustrates. The article shows that B-II has largely been formulated to serve the interests of powerful market players, with developing economies being left out. For developing countries, B-II can make domestic financing more costly and raise the costs of and reduce the access to external financing. Importantly, B-II can exacerbate fluctuations in the supply of external financing, an unfortunate outcome, given that developing countries already suffer from volatility.

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Paper provided by ESRC World Economy and Finance Research Programme, Birkbeck, University of London in its series WEF Working Papers with number 0015.

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Date of creation: Nov 2006
Handle: RePEc:wef:wpaper:0015
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  1. Powell, Andrew, 2002. "A capital accord for emerging economies?," Policy Research Working Paper Series 2808, The World Bank.
  2. Underhill,Geoffrey R. D. & Zhang,Xiaoke (ed.), 2003. "International Financial Governance under Stress," Cambridge Books, Cambridge University Press, number 9780521817325, December.
  3. Beatrice Weder & Michael Wedow, 2002. "Will Basel II Affect International Capital Flows to Emerging Markets?," OECD Development Centre Working Papers 199, OECD Publishing.
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