Financial Crises and Recession in the Global Economy
Studies in International Political Economy
In Financial Crises and Recession in the Global Economy, Roy E. Allen documents and explains the new uses of money and the new financial and trade flows in the global economic system. Approaching international political economy from an economist's perspective, he explores the theoretical significance for the discipline of taking economic globalization seriously.
Professor Allen argues that international financial markets absorb an increasing amount of money in order to operate effectively, making it less available for non-financial or GDP purposes. Professor Allen uses case studies of the 1982 world recession, the 1987 world stock market crash, the slumps of the early 1990s and a series of world debt crises, many of which are still continuing, to demonstrate that this has a crucial effect on the income velocity of money. This process explains movements in stock markets, changing debt-equity ratios of corporations and other recent trends are explained by these processes. Professor Allen shows that the globalization of financial markets and the related interest rate parity processes have been responsible for the large trade and investment imbalances of the 1980s. Economists, it is argued, have not had the tools for evaluating the impact of financial globalization and have therefore made increasingly unreliable predictions.
Addressing economists and non-economists alike in a clear and accessible manner, Roy Allen responds to the failure of existing paradigms such as Keynesianism and monetarism by developing elements of a new methodological approach which better approximates more global economic processes. In conclusion, he suggests ways in which the Group of Seven, the IMF and other institutions can more effectively monitor and react to recent changes in monetary velocity and financial flows.
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What Reviewers Are Saying
`Of 600 books I reviewed on new perspectives on the global economy as a system, this is the one that conveyed the most new information, and plausible explanations for a variety of recent phenomena for which other explanations are unsatisfactory. This is the only book presenting a data-supported theory of the global economic system which connects the real world economy to the new global financial system.' -- Kenneth E.F. Watt, Encyclopedia of Human Ecology `. . . the emphasis placed by the author on the international frame as the basic unit of economic analysis and his rejection of equilibrium as the principle informing that analysis make this book much more appropriate for understanding present-day reality than traditional macroeconomic treatises. Such a stance requires intellectual courage. Moreover, in its own terms, this work achieves the purposes it has set itself.' -- G. Carchedi, Review of International Political Economy