Papers by Juan Pablo Painceira
Chapters, 2012
This vital new Handbook is an authoritative volume presenting key issues in finance that have bee... more This vital new Handbook is an authoritative volume presenting key issues in finance that have been widely discussed in the financial markets but have been neglected in textbooks and the usual compilations of conventional academic wisdom.
Routledge eBooks, Aug 31, 2021
Routledge eBooks, Aug 31, 2021
Routledge eBooks, Aug 31, 2021
Routledge eBooks, Aug 31, 2021
Routledge eBooks, Aug 31, 2021
Routledge eBooks, Aug 31, 2021
Routledge eBooks, Aug 31, 2021
Since the beginning of the 2000s, emerging market economies, or middleincome countries, have emba... more Since the beginning of the 2000s, emerging market economies, or middleincome countries, have embarked on major changes in their domestic financial systems. These changes-in which central banks have been key players-are shaped by the process of financialisation, which can generally be characterised by the dominance of financial considerations in the conduct of major agents (banks, non-financial corporations and households). As a consequence of the emerging markets crisis at the end of the 1990s, a new phenomenon in global financial markets emerged: a massive accumulation of foreign reserves in emerging economies. This has had important consequences for the global economy in which developed economies are the major beneficiaries. Based on Marxist political economy, this book studies the trends towards financialisation in emerging economies, focusing on the effects of the reserve accumulation in their international and domestic spheres. It argues that reserve accumulation has been the very catalyst of financialisation, being related to the subordinated position of emerging economies in the international monetary system. The chapters explore how these trends were exacerbated by the 2008 global financial crisis as well as the extraordinary monetary measures undertaken by the major central banks to deal with the effects of this. Foreign investors invested an enormous amount into emerging economies between 2010 and 2012 and emerging-market financial assets have doubled since 2008. To conclude, the book discusses how the US monetary policy normalisation has added more complexity to these trends since 2013 by putting pressure on emerging markets related to the level of global liquidity. This book provides essential reading for students and scholars of finance, economics and political economy who are interested in the unfolding of the subordinated financial integration of emerging economies into global financial markets.
Libros de la CEPAL, Jun 6, 2018
En este capitulo se analiza el surgimiento de nuevas practicas, comportamientos y relaciones fina... more En este capitulo se analiza el surgimiento de nuevas practicas, comportamientos y relaciones financieras en las economias capitalistas emergentes utilizando el ejemplo de las economias latinoamericanas, en particular el Brasil. Se argumenta que en las economias capitalistas emergentes, estas recientes transformaciones financieras, que revelan tendencias similares a los fenomenos de financierizacion observados en las economias capitalistas centrales, estan determinadas fundamentalmente por su integracion subordinada a un sistema monetario y financiero internacional financierizado y estructurado. Por otra parte, esas mismas tendencias de financierizacion refuerzan la integracion financiera subordinada de las economias capitalistas emergentes y sus asimetrias con las economias capitalistas centrales.
New Political Economy, Jul 13, 2017
This paper analyses the recent changes in financial practices and relations in emerging capitalis... more This paper analyses the recent changes in financial practices and relations in emerging capitalis t economies (ECEs) using the example of Brazil. It argues that in ECEs these financ ia l transformations, akin to the financialisation phenomena observed in Core Capitalist Economies (CCEs), are fundamentally shaped by their subordinated integration into a financialised and structured world economy. To analyse this subordinated financialisation the paper draws on the framework of international currency hierarchies. It shows by means of two specific processes how the existence of a hierarchic international monetary system has changed the financial behaviour of domestic economic agents and with it the structure of the financial system. The first process highlights the phenomenon of reserve accumulation and the changing behaviour of domestic banks. The second points to ECEs' sustained external vulnerability and its impact on the operations of Brazilian non-financial corporations. The paper also shows that not only were these financ ia l transformation shaped by ECEs' subordinated financial integration, but it was these financialisation tendencies themselves which contributed to cementing existing hierarchies and further deepened existing asymmetries between ECEs and CCEs.
During the spring of 2010, financial markets in the eurozone started to signal a re-awakening of ... more During the spring of 2010, financial markets in the eurozone started to signal a re-awakening of the global financial crisis. As the euro sovereign debt crisis gained momentum, the euro embarked on a steep slide, and government bond and credit default swap (CDS) spreads started to rise dramatically, reaching levels not seen since the introduction of the common currency. Further, renewed pressures in the money market pushed up London Interbank Offered Rates (Libor), as banks became reluctant to lend to each other - fuelled by the uncertainty about each other's exposures to peripheral European countries and what the effects of the fall in prices of sovereign bonds might have on their balance sheets when marked-to-market. Libor-OIS spreads (both for dollar and euro loans) started to widen again, after a long period of narrowing following central banks' injections of vast amounts of liquidity into the banking systems in the aftermath of the Lehman Brothers collapse. Arguably even more importantly than Libors, both the FX swap and the cross-currency swap markets started to indicate serious strains in the interbank lending market for dollars. As the latter involves real cash, ie, physical exchange of notional often with dollars on one side, it is a better gauge for the relative demand of the currency than the indicative and non-binding Libor setting process. These strains were a symptom of European banks being unable, or having to pay a high cost, to fund their activities in the United States, which had surged since the launch of the euro. With the European Central Bank (ECB) unable to offer dollars, and the Federal Reserve unable to lend dollars directly to European banks, dollar swap lines were, as in the case of Lehman Brothers, yet again set up to protect the health of the banking system. The drivers this time were different, however, as we shall explore.
Palgrave Macmillan UK eBooks, 2010
This chapter shows the fundamental role of Korean banks in the explosion of South Korea’s financi... more This chapter shows the fundamental role of Korean banks in the explosion of South Korea’s financial crisis in 1997 using an adapted Financial Instability Hypothesis (FIH) as an analytical tool to explain it unfolding.1
Development and Change, May 1, 2017
This paper contributes to the debate on macroeconomic management and capital account regulations ... more This paper contributes to the debate on macroeconomic management and capital account regulations in developing and emerging countries (DECs). It argues that the recommendation by neoclassical economists and international financial institutions (IFIs) to combine an inflation targeting regime with exchange rate management, whilst maintaining open capital accounts, is both impossible and potentially counterproductive. This, it shows with extensive semi-structured interviews with currency traders in Brazil and London, is due to the peculiar way such a regime shapes central bank interventions in the money and foreign exchange markets and the destabilising way these interventions interact with financial market expectations. The interview results also demonstrate that the guidelines issued by IFIs actually undermine, rather than aid, DEC central banks' initial attempt to manage excessive exchange rate movements. These results support the long-standing argument by heterodox economists and critical international political economists that DECs need to make the exchange rate an explicit instrument and goal of their macroeconomic policy and complement it with comprehensive capital account regulations to reduce the destabilising impact of international capital flows. The interview results also give some concrete suggestions on how to do so.
RePEc: Research Papers in Economics, 2010
This paper argues, referring to Marxist political economy and using the example of the Bank of En... more This paper argues, referring to Marxist political economy and using the example of the Bank of England (BOE), that central banks are among the most important promoters of financialisation in capitalist economies. Central banks' crucial role in supporting this financialisation process is due to their inherent nature as bank of banks whose primary objective is to safeguard the stability of the money (interbank) market and maintain banks' importance in the economic system. This inherent function of central banks might co-exist or indeed be exaggerated by the existing macroeconomic regime. For example, the paper shows that the interest rate setting by the BOE, shaped by the needs of the inflation targeting regime, and the consequent appreciation of the Pound Sterling allowed UK banks to expand their holding of foreign assets globally, which in turn reinforced domestic financialisation as British banks could stretch their balance sheets. As a result of the strong pound, British banks were able to acquire cheap funding abroad, which they recycled into domestic consumer loans, the rise of which has been identified as a crucial element of financialisation. However, the inherent role of the central bank becomes evident, and might indeed create tensions with the existing macroeconomic regime, during the moment of crisis when the stability of the money market and with it that of the entire banking system becomes threatened. When the global crisis burst in 2008, the BOE employed measures and instruments of liquidity management in order to address the banks' liquidity and solvency problems, performing essentially the role of bank of banks. These measures were undertaken despite the BOE's institutional context of an inflation target regime, whose primary objective is to maintain price stability and which thus stands in total opposition to an excess expansion of liquidity. In line with the inherent nature of central banks in a Marxist political economy approach, these measures primarily addressed banking problems located in money markets in order to prompt recovery the credit system by keeping the banks´ prominence in the economic system which is one of the main pillars of financialisation. On a more general level, the interpretation of central banks put forward in this paper has important implications for our view of central banks, but also the prominence to monetary policy more generally. Indeed, in financialised capitalism, the inherent nature of the central bank as bank of banks means that shifting the onus of economic policy making to monetary policy inherently supports the financialisation process. Thus, the prominence of monetary policy and the attempt to solve the ongoing economic problems in the developed world are not only ineffective, but also contribute substantially to further strengthen and promote the financialisation process in these countries. More than that, any attempt to add additional roles to the central bank (such as growth, employment), whilst at the same time maintaining central banks' power and independence, will fail to revert this financialisation process and recurrent crisis phenomena. Thus, in this view, one crucial element of policies which aim to reduce the degree of financialisation will be to re-strengthen the role of fiscal relative to monetary policy and reinstate the influence of national governments on central bank decisions.
RePEc: Research Papers in Economics, Feb 28, 2016
This paper analyses the recent changes in financial practices and relations in emerging capitalis... more This paper analyses the recent changes in financial practices and relations in emerging capitalist economies (ECEs) on the basis of using the example of Brazil. It argues that in ECEs these financial transformations, which are akin to those observed in Core Capitalist Economies (CCEs) summarised under the heading of financialisation, are fundamentally shaped by their integration into a financialised and structured world economy. Moreover, this integration takes place in a subordinated way. The paper draws on the multidisciplinary framework of international currency hierarchies in order to analyse this subordinated financial integration and tendency toward financialisation. It shows how the existence of a hierarchic international monetary system has changed the financial behaviour of domestic economic agents as well as the structure of the domestic financial system. In doing so, the paper focuses on two specific channels. The first channel highlights the phenomenon of reserve accumulation and the changing behaviour of domestic banks. The second channel concerns the ECEs’ sustained external vulnerability and the impact of such vulnerability on the operations of Brazilian firms. The paper shows that not only have these financial transformations been shaped by ECEs’ subordinated financial integration, but also that these financialisation tendencies have contributed to cementing existing hierarchies and deepening uneven economic development.
This vital new Handbook is an authoritative volume presenting key issues in finance that have bee... more This vital new Handbook is an authoritative volume presenting key issues in finance that have been widely discussed in the financial markets but have been neglected in textbooks and the usual compilations of conventional academic wisdom.
RePEc: Research Papers in Economics, 2009
ABSTRACT This paper argues that Brazil has become subject to new forms of external vulnerability,... more ABSTRACT This paper argues that Brazil has become subject to new forms of external vulnerability, which led to one of the largest exchange rate depreciations among emerging markets in the recent global financial crisis. Going beyond traditional external vulnerabilities in the form of creditor-debtor relations and stressing the dialectic relationship between capital flows and domestic financial conditions, it is argued that any exposure to (short-term) foreign investment creates vulnerabilities in the domestic economy, making price dynamics increasingly dependent on conditions in international financial markets. In the case of Brazil this vulnerability manifested itself particularly in a rising share of foreign participation in the domestic stock and derivative markets. The rising liquidity of the Brazilian financial system, characterised by a very short-term nature of financial assets and the willingness of the central bank to provide liquidity to the market at any time, fuelled the share of foreign investment in Brazilian assets. The large stock of accumulated foreign investment in Brazilian assets and the liquidity with which these were traded significantly exacerbated exchange rate volatility in the crisis, as � despite sound fundamentals - the country�s assets were among the first and with the largest volume to be sold. It is further shown that Brazil�s rising external vulnerability was not unrelated to domestic economic conditions. Through its operations in the foreign exchange market and providing liquidity to the market - both before and during the crisis - the central bank significantly contributed to Brazil�s increased vulnerability to international market conditions.
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Papers by Juan Pablo Painceira