Global Banks and Monetary Regimes
Explores multinational banks’ role in enhancing monetary credibility, revealing the importance of market confidence in an interconnected world
Nations with credible monetary regimes borrow at lower interest rates in international markets and are less likely to suffer speculative attacks and currency crises. While scholars typically attribute credibility to domestic institutions or international agreements, Jana Grittersová argues that when reputable multinational banks headquartered in Western Europe or North America open branches and subsidiaries within a nation, they enhance that nation’s monetary credibility.
These banks enhance credibility by promoting financial transparency in the local system, improving the quality of banking regulation and supervision, and by serving as private lenders of last resort. Reputable multinational banks provide an enforcement mechanism for publicized economic policies, signaling to international financial markets that the host government is committed to low inflation and stable currency.
Grittersová examines actual changes in government behavior of nations trying to gain legitimacy in international financial markets, and the ways in which perceptions of these nations change in relation to multinational banks. In addition to quantitative analysis of over 80 emerging-market countries, she offers extensive case studies of credibility building in the transition countries of Eastern Europe, Argentina in 2001, and the global financial crisis of 2008. Grittersová illuminates the complex interactions between multinational banks and national policymaking that characterize the process of financial globalization to reveal the importance of market confidence in a world of mobile capital.
“The rigorous and detailed qualitative and quantitative evidence that Grittersová presents ensures that Borrowing Credibility will become the definitive treatment of monetary reform and financial integration in Eastern Europe.”
—Thomas Oatley, University of North Carolina at Chapel Hill
“In Borrowing Credibility, Jana Grittersová makes an important contribution to international political economy by showing that global banks provide previously unrecognized benefits to developing countries’ creditworthiness and financial stability. This book will definitely shape how both scholars and policymakers approach the role of international banks.”
—J. Lawrence Broz, University of California, San Diego
"Credibility is essential for effective economic policy, but it is elusive as an attribute of governments and as an analytic concept. In this important book, Jana Grittersova gives this elusive concept new content. She explains and then documents how governments in Central Europe, and in emerging markets generally, have been able to gain credibility through their interaction with foreign banks. Borrowing Credibility is a major contribution to the theoretical and empirical literatures in international relations and international economics alike."
—Barry Eichengreen, University of California, Berkeley
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