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| 1 |
ID:
157553
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| Summary/Abstract |
What factors generate financial fragility in open economies? Existing research assumes that the development of these conditions is more likely to emerge under some configurations of domestic economic and political attributes. We examine the development of financial fragility through the ontological lens of the new interdependence approach, which assumes that global factors can be as important as local factors in generating outcomes. We analyze global financial conditions from 1978 to 2009 and argue that contemporary global finance is an oscillating system that generates boom and bust capital flow cycles. The phases of this cycle are a consequence of the scale of US net borrowing on global markets: when the United States is a large net importer of foreign capital, other economies struggle to attract foreign capital and are substantially less likely to develop fragile financial positions; when US net capital imports fall, other economies receive an abundance of foreign capital, and financial fragility becomes more likely. In contrast, we find little evidence that cross-national variation in political institutions or financial systems explains why fragility develops, although some regional interdependencies are evident. We conclude that global conditions drive the probability of crises occurring someplace in the system, while local outcomes appear to be idiosyncratic.
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| 2 |
ID:
121594
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| Publication |
2013.
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| Summary/Abstract |
Although the subprime crisis regenerated interest in and stimulated debate about how to study the politics of global finance, it has not sparked the development of new approaches to International Political Economy (IPE), which remains firmly rooted in actor-centered models. We develop an alternative network-based approach that shifts the analytical focus to the relations between actors. We first depict the contemporary global financial system as a network, with a particular focus on its hierarchical structure. We then explore key characteristics of this global financial network, including how the hierarchic network structure shapes the dynamics of financial contagion and the source and persistence of power. Throughout, we strive to relate existing research to our network approach in order to highlight exactly where this approach accommodates, where it extends, and where it challenges existing knowledge generated by actor-centered models. We conclude by suggesting that a network approach enables us to construct a systemic IPE that is theoretically and empirically pluralist.
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