The emerging markets are in turmoil. Stocks and currencies are falling. Global investors are pulling money out of stocks and bonds. Is another crisis looming?
To answer that question, the World Bank in February held a panel discussion led by authors of three books examining lessons learned from financial crises. Mahmoud Mohieldin, World Bank Group president’s special envoy, said the three books can help policy makers examine the current turmoil affecting emerging markets, along with the hypothetical diagnoses proposed by some commentators: distorted asset prices, questionable growth foundations, human behavior, and overborrowing by households and the private sector.
Calomiris and Haber talk with EconTalk host Russ Roberts about their book. The conversation focuses on how politics and economics interact to give some countries such as Canada a remarkably stable financial system while others such as the United States have a much less stable system. The two authors discuss the political forces that explain the persistence of seemingly bad financial regulation. The conversation includes a discussion of the financial crisis of 2008.
The world displays an instructive variety of banking system designs, some successful, some fragile, and some crisis prone. For example, the US has had numerous banking crises throughout its history while Canada has experienced none. At this event, Charles Calomiris presented the book Fragile by Design, and a discussion by banking experts followed.
The Political Origins of Banking Crises and Scarce Credit