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ABSTRACT
In the wake of the global financial crisis most emerging market and developing countries experienced a surge in capital inflows that accentuated financial fragility in those countries. Unlike similar surges in the 1990s and in the five years leading to the global financial crisis in 2008, this time many emerging market and developing countries re-regulated cross-border financial flows. According to the literature such acts are seen as quite difficult, given the pervasiveness of the ‘capital mobility hypothesis’ which renders that the structural power of global financial markets is too much of a match for states, especially those in emerging markets. The paper traces how Brazil and South Korea were able to countervail the structural power of global capital markets and put in place regulations on cross-border finance in the wake of the crisis. The paper also outlines the contours an inductive theory regarding the conditions under which emerging market and developing nations may deviate from the ‘capital mobility hypotheses’ and similar literatures. This concept is referred to as ‘countervailing monetary power’.
ACKNOWLEDGEMENTS
The author would like to thank June Park, Amos Irwin, Juliana De Costa Plaster, and Alex Hamilton for research assistance on this paper. The author would also like to thank Cornel Ban, Robert Wade, and Eric Helleiner for useful comments on the paper as well. Finally the author would like to acknowledge the Institute for New Economic Thinking for financial support of the research going into this article.
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Kevin P. Gallagher
Kevin P. Gallagher is associate professor at the Pardee School for Global Studies at Boston University, where he co-directs the Global Economic Governance Initiative. His recent book is Ruling Capital: Emerging Markets and the Re-Regulation of Cross-Border Finance.