Financial Crises and the Politics of Macroeconomic Adjustments When are policymakers willing to make costly adjustments to their macroeconomic policies to mitigate balance-of-payments problems? Which types of adjustment strategies they choose? Under what circumstances they delay reform, and when are such delays likely to result in financial crises? To answer these questions, this book examines how macroeconomic policy adjustments affect individual voters in financially open economies and argues that the anticipation of these distributional effects influences policymakers’ decisions about the timing and the type of reform Empirically, the book combines analyses of cross-national survey data of voters’ and firms’ policy evaluations with comparative case studies of national policy responses to the Asian financial crisis of 1997–8 and the recent global financial crisis in Eastern Europe The book shows that variation in policymakers’ willingness to implement reform can be traced back to differences in the vulnerability profiles of their countries’ electorates Stefanie Walter is Full Professor for International Relations and Political Economy in the Department of Political Science at the University of Zurich Prior to joining the University of Zurich, she held positions as Fritz-Thyssen-Fellow at Harvard University and Junior Professor for International and Comparative Political Economy at the University of Heidelberg Her research concentrates on the fields of international and comparative political economy, with a particular focus on how distributional conflicts, policy preferences, and institutions affect economic policy outcomes Her work has been published, inter alia, in Economics & Politics, European Journal of Political Research, International Organization, International Studies Quarterly, Review of International Political Economy, and World Development She received her PhD in Political Science from ETH Zurich Political Economy of Institutions and Decisions Series Editors Stephen Ansolabehere, Harvard University Jeffry Frieden, Harvard University Founding Editors James E Alt, Harvard University Douglass C North, Washington University of St Louis Other Books in the Series Alberto Alesina and Howard Rosenthal, Partisan Politics, Divided Government and the Economy Lee J Alston, Thrainn Eggertsson, and Douglass C North, eds., Empirical Studies in Institutional Change Lee J Alston and Joseph P Ferrie, Southern Paternalism and the Rise of the American Welfare State: Economics, Politics, and Institutions, 1865–1965 James E Alt and Kenneth Shepsle, eds., Perspectives on Positive Political Economy Josephine T Andrews, When Majorities Fail: The Russian Parliament, 1990–1993 Jeffrey S Banks and Eric A Hanushek, eds., Modern Political Economy: Old Topics, New Directions Yoram Barzel, Economic Analysis of Property Rights, 2nd edition Yoram Barzel, A Theory of the State: Economic Rights, Legal Rights, and the Scope of the State Robert Bates, Beyond the Miracle of the Market: The Political Economy of Agrarian Development in Kenya, Second Edition Jenna Bednar, The Robust Federation: Principles of Design Charles M Cameron, Veto Bargaining: Presidents and the Politics of Negative Power (continued after Index) For Jörn, Nils, and Lukas Financial Crises and the Politics of Macroeconomic Adjustments Stefanie Walter University of Zurich 32 Avenue of the Americas, New York ny 10013-2473, USA Cambridge University Press is part of the University of Cambridge It furthers the University’s mission by disseminating knowledge in the pursuit of education, learning, and research at the highest international levels of excellence www.cambridge.org Information on this title: www.cambridge.org/9781107028708 © Stefanie Walter 2013 This publication is in copyright Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press First published 2013 Printed in the United States of America A catalog record for this publication is available from the British Library Library of Congress Cataloging in Publication data Walter, Stefanie Financial crises and the politics of macroeconomic adjustments / Stefanie Walter, University of Zurich pages cm. – (Political economy of institutions and decisions) Includes bibliographical references and index ISBN 978-1-107-02870-8 (hardback) 1. Economic stabilization – Political aspects 2. Financial crises. I. Title HB3732.W35 2013 339.5–dc23 2013009472 ISBN 978-1-107-02870-8 Hardback Cambridge University Press has no responsibility for the persistence or accuracy of URLs for external or third-party Internet Web sites referred to in this publication and does not guarantee that any content on such Web sites is, or will remain, accurate or appropriate Contents List of Figures List of Tables Preface page x xii xiii Introduction 1.1 Why Macroeconomic Adjustment Becomes Necessary 1.2 How and When Do Policymakers Adjust? Existing Explanations 1.3 The Argument 1.4 The Plan of the Book Individual Vulnerability to Macroeconomic Adjustment 2.1 The Distributional Effects of External Adjustment 2.2 The Distributional Effects of Internal Adjustment 2.3 The Vulnerability Profile and Voters’ Preferences on External and Internal Adjustment 2.4 Conclusion Direct Vulnerabilities to Adjustment: European Voters in the 2008–2009 Global Financial Crisis 3.1 Voter Evaluations of Economic Policy Outcomes during the 2008–2010 Global Financial and Economic Crisis: Research Design 3.2 How Exchange Rate Changes Affect Voters Vulnerable to External Adjustment 3.3 How Internal Adjustment Affects Voters’ Evaluations of the Severity of Crisis Repercussions 3.4 Conclusion vii 14 22 27 31 42 49 52 54 57 65 69 74 viii Contents Indirect Vulnerabilities to Adjustment: The Determinants of Firms’ Monetary and Exchange-Rate Policy Preferences 4.1 How Firms Assess Their Vulnerabilities to Exchange-Rate and Monetary Policy 4.2 The Determinants of Firms’ Vulnerabilities to External Adjustment 4.3 The Determinants of Firms’ Vulnerabilities to Internal Adjustment 4.4 Firms’ Overall Vulnerabilities to Macroeconomic Adjustment 4.5 Conclusion 78 81 88 95 99 106 Interests, Elections, and Policymakers’ Incentives to Adjust 5.1 To Adjust or Not to Adjust? And If So, When and How? The Government’s Decision Problem 5.2 The Voter’s Viewpoint: Policy Outcomes and Vote Choice 5.3 How the Electorate’s Vulnerability Profile Affects Policymakers’ Choices about the Speed and Type of Adjustment 5.4 Conclusion 110 Adjustment in the Asian Financial Crisis 6.1 Thailand: Delayed Adjustment and Exchange-Rate Crash 6.2 Taiwan: Speedy External Adjustment 6.3 Hong Kong: Immediate Internal Adjustment 6.4 South Korea: Delayed Adjustment and Exchange-Rate Crash 6.5 Conclusion 6.6 Appendix: List of Interviewees 131 134 145 154 Adjustment in Eastern Europe during the Global Financial Crisis 7.1 Eastern European Responses to the Global Financial and Economic Crisis 7.2 Vulnerabilities to Internal and External Adjustment across Eastern Europe 7.3 The Distributional Politics of Adjustment to the Global Financial Crisis 7.4 Conclusion 111 114 121 128 164 177 179 181 186 193 205 215 References 241 Pattie, Charles, Daniel Dorling, and Ron Johnston 1997 The Electoral Geography of Recession: Local Economic Conditions, Public Perceptions and the Economic Vote in the 1992 British General Election Transactions of the Institute of British Geographers 22 (2): 147–61 Pepinsky, Thomas 2009 Economic Crises and the Breakdown of Authoritarian Regimes: Indonesia and Malaysia in Comparative Perspective 1st ed Cambridge: Cambridge University Press 2012 The Global Economic Crisis and the Politics of Non-Transitions Government and Opposition 47 (2): 135–61 Perng, Fai-nan 1999 Responding to the Challenges: Financial Development and Structural Change in the ROC Economy Planned speech at the Chinatrust Dinner on the Eve of the International Monetary Fund/World Bank Annual Meetings (Dinner was canceled), Twin Oaks Garden, Washington DC Pierson, Paul 1994 Dismantling the Welfare State? 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1999 “Evolution of Taiwan’s Financial System.” In East Asia’s Financial Systems: Evolution and Crisis, eds Seiichi Masuyama, Donna Vandenbrink, and Chia Siow Yue Tokyo: Nomura Research Institute. 260–90 Yao, Y C 1998 Money and Finance in Hong Kong: Retrospect and Prospect EAI Occasional Paper No. 2 Yu, Min-Teh 1999 “Banking Environment and Reform Measures of Taipei, China during the Asian Financial Crisis.” In Rising to the Challenge in Asia A Study of Financial Markets Vol 3: Sound Practices, ed Asian Development Bank Manila: Asian Development Bank. 142–65 Index adjustment strategies, 6, See also external adjustment; internal adjustment; macroeconomic adjustment; mixed adjustment choice of, 20, 110, 126–28, 221 costs See also macroeconomic adjustment: distributional consequences; vulnerabilities external See external adjustment internal See internal adjustment mixed See mixed adjustment preferences, 42, 153 preferences about, 22, 142, 162, 173, 206, 213, See also policy preferences aggregate demand, 40, 48 aggregate supply, 48 appreciation See exchange rate: appreciation Argentina, 1, 2, 182 Asian financial crisis, 24, 80, 129, 131 case studies, 131–79 policy responses, 129, 132, 178 role of international actors, 126 vulnerability profiles, 178 assets, 33, 43, 95, See also balance sheets; savings foreign currency, 35 in foreign currency, 38, 41 balance of payments, problems See balance of payments problems balance of payments problems, 4–6, 111, See also current account deficit; individual countries fundamental, 6, 18, 112, 136 imbalances See balance of payments problems no adjustment, 112 policy options, 5, 18, 113, 185 policy response, 18–21, 113, See also individual countries temporary, 6, 18, 112 types of, 6, 112–13, 124 balance sheets, 33, 38, 219 corporate, 46, 94, 138, 140, 149, 158, 160, 168, 170, 196, 201 foreign currency denomination, 38, 138, 194, See also foreign currency borrowing mismatched, 38, 40, 138, 169, See also currency mismatch personal, 43, 60, 65, 76, 137, 148, 150, 157, 159, 168, 170, 194, See also mortgages vulnerability to external adjustment, 34 vulnerability to internal adjustment, 43, 46 Baltic countries, 34, 184, 187–90, 221, See also Estonia, Latvia; Lithuania Bank of Korea, 174 Bank of Thailand, 136, 143, 144 banking crises, 2, 40 Belarus, bias, 88, 90 borrowers, 94, See also balance sheets; debt; foreign currency borrowing budget cuts See fiscal policy Bulgaria, 25, 221, See also Eastern Europe policy response, 187–90 politics, 210 vulnerabilities, 193–205 capital inflows, 4, 8, 134, 186, 194 case selection, 133, 185 case studies, 24, 129, 133, 221 Central Bank of China, 151 245 246 Index chaebol, 165, 169, 170 competitiveness, 37–38, 137, 148, 157, 168, 196, 207 conditionality, 127, See also International Monetary Fund (IMF) contagion, 146, 155, 198, 207 control variables, 64, 91, 96 crises, 2007–11 crisis See Global financial and economic crisis Asian financial crisis See Asian financial crisis banking crises, 2, 40 costs, currency crises, 1, 2, 7, 125, 136, 166 Eurozone crisis See Eurozone crisis Global financial and economic crisis, 3, See Global financial and economic crisis probability of, 124 repercussions on national economy, 59, 67, 71 repercussions on personal situation, 59, 67, 69 currency crises, 1, 2, 7, 125, 136, 166 currency mismatch, 40, 138, 169, See also balance sheets: mismatched current account deficit, 111, 165, See also balance of payments problems; deficit countries current account deficits, 186 causes of, 112–13 Czech Republic, 25, 222, See also Eastern Europe policy response, 191–92 politics, 214 vulnerabilities, 193–205 debt See also balance sheets; foreign currency borrowing; mortgages domestic currency, 62, 95 in domestic currency, 200, See also balance sheets in foreign currency, 33–36, See also balance sheets; foreign currency borrowing public, 203 debt/asset ratio, 95 debtors, 96 deficit countries, 4, 187, 225 delayed adjustment, 7, 11–13, 18, 111, See also individual countries; macroeconomic adjustment: timing feasibility, 5, 124–26 incentives, 21, 123–26, 144, 227 demonstrations See political costs: public protests dependent variables, 59, 83, 100 depreciation, 91, 147, 166, 190, 191, See also devaluation; external adjustment devaluation, 136, 166, See also depreciation; external adjustment competitiveness effects, 37–38, 92, 176, See competitiveness consumption effects, 32, 176 financial effects, 34, 38–39, 94, 176 discounting, 11, 119 distributional conflict, 12, 161 distributional considerations, 18–21, 23, 110, 122, 222, See also external adjustment: vulnerability to; macroeconomic adjustment: distributional consequences; vulnerability; vulnerability profiles: effects on policy choice distributional effects of adjustment, 14–17, See also macroeconomic adjustment: distributional consequences Eastern Europe, 181–217, 221, See also Baltic countries; individual countries balance of payments problems, 181, 186, 187, 190 policy responses, 186–93 politics, 205–15 vulnerabilities, 193–205 economic growth, 217, See also recession economic reforms, See also fiscal policy; internal adjustment; structural reforms economic voting, 57, 115–16 elections, 124, 143, 163, 172, 176, See also political business cycles; voters effect on timing of adjustment, 11, 20, 176, 223 electoral considerations, 225 outcomes, 177, 210, 212, 214 reelection probability, 116 employment-specific effects of adjustment, 36–39, 46–47, 78, 196–97, 201–202, See also firms Estonia See also Baltic countries; Eastern Europe policy response, 45, 187–90 politics, 208 vulnerabilities, 193–205 Euro adoption, 182, 187, 198, 207 Eurobarometer, 57 European Monetary Union (EMU), 61, 225 European Union, 190, 198, 203, 207 Eurozone crisis, 182, 225 exchange rate, 61, 86 Index appreciation, 68, 91 defense, 161, 166, 187, See also foreign currency reserves: sales; internal adjustment; monetary tightening; sterilized intervention depreciation See also depreciation; devaluation; external adjustment devaluation See also depreciation; devaluation; external adjustment overvaluation, 2, 6, 137, 168, 181 stability, 9, 16 exchange rate policy, 16, 187, 190, 191 evaluation of, 83 preferences, 10, 42 variation, 61 exchange rate regime, 198 exchange rate regimes currency boards, 155, 158, 182 effect on adjustment strategy, 182 effect on vulnerability profiles, 224 expenditure cuts See fiscal policy expert interviews, 133 exporters, 36, 92, 98, 103 measurement, 89 preferences, 10, 153, 162, 213 vulnerabilities, 148, 196 vulnerabilities of, 137 exposure See vulnerability external adjustment, 3, 191–92, 217, See also depreciation; devaluation; individual countries effects on firms, 36–39, 88, 92–95, 196 effects on voters, 31–36, 41–42, 65–69 general economic effects, 39–41, 197 operationalization, 61, 91, 217 vulnerability, 60 vulnerability to, 31–42, 137–39, 148–50, 156–59, 168–70, 193–99, See also individual countries; overall vulnerability; vulnerability financial crises, 2, 129, 219, See also banking crises; currency crises risk of, 2, 21, 124, 198 financial globalization, 10, 15–17, 33, 220 financial markets, 125, 127, 186, 226 firms, 30, 46, 79, 196 effects of adjustment on, 36–39, 92–95 policy evaluations, 23, 78 fiscal policy, 6, 47, 142, 189, 191, 192, 200, 203, See also individual countries; internal adjustment contractionary, 45 247 contradictory, 44–45 foreign currency borrowing, 33–36, 196, 207, 210, 217, 219, 228, See also balance sheets; external adjustment: vulnerability to corporate, 38, 103, 138, 169, 196 incentives for, 33, 224 individuals, 27, 33, 194 measurement, 60, 90 foreign currency denomination , See also balance sheets: foreign currency denomination; foreign currency borrowing foreign currency reserves, 5, 126 sales, 18, 136, 190, See also sterilized intervention foreign reserve sales, 147 general economic effects of adjustment, 39–41, 48, 197–99, 203–204 Global financial and economic crisis, 25, 129, 181, See also Eastern Europe; individual countries balance of payments problems, 181 individual evaluations, 59 individuals, 43, 57 policy responses, 3, 58, 72, 129 Gold standard, 184 Great Britain, 1, 34, 72 Great Recession, See Global financial and economic crisis Greece, 2, 28, 46, 117, 182, 227 hedging, 34, 39, 169 hierarchial regression analysis See multilevel regression analysis homeowners, 200, See also mortgages Hong Kong, 25, 154–64, 179, 221 economic developments, 155–56 financial sector, 157, 160, 162 internal adjustment, 156, 161 policy choices, 161–64 service sector, 155, 158 vulnerabilities, 156–61 Hong Kong Monetary Authority, 155, 163 Hungary, 25, 27, 222, See also Eastern Europe policy response, 190–91 politics, 211 vulnerabilities, 193–205 imbalances See balance of payments problems import-competing sector, 36, 47 248 Index incentives, 218, 227 for foreign currency borrowing, 33, 224 to delay adjustment, 18, 20 independent variables, 60, 89, 95, 101 individual-level data See survey data inflation, 32 institutions, 11, 224 interaction terms, 61, 63, 90, 91, 96 interest groups, 10, 122, 173, 225 lobbying, 27, 80, 142, 153, 162, 173 interest rates, 43, 63, 84, 87, 96, 200 increases See monetary policy, monetary tightening interests See policy preferences internal adjustment, 3, 154, 184, 187–90, See also fiscal policy; individual countries; monetary tightening; structural reforms effects on firms, 46–47, 96–99, 201 effects on voters, 43–46, 69–74, 162, 184 general economic effects, 203 general economic effects of, 48 operationalization, 63, 96, 217 vulnerability, 62 vulnerability to, 42–49, 139–40, 150–51, 159–60, 170–71, 199–204 internal devaluation, See international adjustment international actors, 126, 127, 189, 190, 203, 226 International Financial Statistics, 82 International Monetary Fund (IMF), 126, 176, 190, 192, 208, 226 conditions, 126, 136, 166 international politics, 8, 226 J-curve effect, 11 labor market flexibility, 160, 202, 208 labor market reforms See structural reforms Latvia See also Baltic countries; Eastern Europe policy response, 184, 187–90 politics, 209 vulnerabilities, 193–205 liabilities See also balance sheets; debt; foreign currency borrowing; mortgages Lithuania See also Baltic countries; Eastern Europe policy response, 187–90 politics, 209 vulnerabilities, 193–205 macroeconomic adjustment See also adjustment strategies; external adjustment; internal adjustment delay, See delayed adjustment distributional consequences, 14–17, 22, 222 distributional consequences of, 31–49 effect on firms, 101–106, See also firms: effect of adjustment on effect on voting, 116–21, See also elections policy options, 18, 23, 113 timing, 11–13, 20, 122–26, See also delayed adjustment type of, 20, 126 macroeconomic policies in open economies, 16, See also exchange rate policy; fiscal policy; monetary policy manufacturing sector, 98 marginal effects, 67, 73 method, 64, 92, 96, 101 Mexico, microfoundation, 76, 106 microlevel analysis, 57–76, 81–107, 219, See also survey data mixed adjustment, 127, 167, 182, 190–91 monetary policy, 43, 46, 48, 192, See also individual countries; interest rates; internal adjustment; monetary tightening autonomy, 9, 16 evaluation of, 84, 96 in response to speculative pressure, 135, 143, 147, 152, 155 operationalization, 63, 96 tightening See monetary tightening monetary tightening, 3, 43, 46, 95, 152, 155, 190, See also interest rates mortgage, 71, 73 mortgages, 62, 200 multilevel regression analysis, 64, 92, 96, 101 Mundell-Fleming Model, non-performing loans, 140, 165, 171, 191, 197 non-tradables sector, 36, 38, 47, 186, 201 open-economy-trilemma See unholy trinity operationalization, 59–65, 89–92, 95–96, 100 optimum currency area theory, original sin, 33 overall vulnerability, 50, 141, 161, 171, 216, 218, See also vulnerability; vulnerability profile Index effect on voting decision, 116, 122 firms, 100 measurement, 84 overheating, 186, 201 Poland, 25, 222, See also Eastern Europe policy response, 191–92 politics, 214 vulnerabilities, 193–205 policy choice, 18–21, See also balance of payments problems: policy response; individual countries policy implications, 227 policy preferences, 12, 222, See also adjustment strategies: preferences about; exchange rate policy: preferences; exporters: preferences; interest groups: lobbying adjustment strategies, 9, 17, 42, 49–53 corporate, 78, 80, 95 individuals, 9, 22, 106, 220 policymakers, 17, 111–13, 221, 222, 224, See also elections; politics decision problem, 19, 122 distributional considerations See distributional considerations electoral considerations, 121 opportunistic, 123 time-inconsistent behavior, 11, 222, 227 political business cycles, 11, 124 political costs, 2, 185, 208 breakdown of government, 208, 212, 215 lost elections, 177, 212 of adjustment, 123, 145 public protests, 2, 209, 212 resignation, 211 riots, 2, 206, 209 political parties, 117n 6, 208, 211 politics, 110–29, 205–15, 218, See also elections; individual countries; interest groups; policymakers; political costs; voters coalition dynamics, 143, 206, 208, 209, 212, 214 domestic, 8, 111, 221 elections See elections international See international politics preferences See policy preferences price deflation, 42, 189, See also internal devaluation; macroeconomic adjustment private sector, 78, 201 property sector, 140, 159, 162 249 public opinion, 162, 174, 206, 209, 214, See also voters public sector, 201 purchasing power, 31, 137, 148, 157, 159, 168, 193 rational ignorance, 118 rational inattention, 118 recession, 28, 48, 115, 141, 156, 172, 187, 208, See also economic growth; internal adjustment reelection probability, 120 research design firm-level analysis, 81–84, 89–92, 95–96, 100–101 individual-level analysis, 57–65 retrospective voting, 115, 120 riots See political costs: riots Romania, 25, 118, 222, See also Eastern Europe policy response, 190–91 politics, 212 vulnerabilities, 193–205 savings, 33, 43, 140, 150, 162, 170, See also assets; balance sheets selection bias, 83 South Korea, 2, 25, 164–77, 178, 222 delayed adjustment, 167, 172 external adjustment, 166, 175 financial sector, 169, 171 foreign reserve sales, 166, 174 policy choices, 172–75 politics, 174, 177 speculative pressure, 166 vulnerabilities, 168–72 special interests, 122, See also firms; interest groups speculative attacks, 155, See also speculative pressure speculative pressure, 1, 125, 127, 141–44, 146, 153, 187, 190, See also speculative attacks measures against, 112, 143, See also exchange rate:defense; external adjustment; internal adjustment; foreign currency reserves: sales; sterilized intervention status-quo bias, See delayed adjustment sterilized intervention, 5, 112, 117, See also foreign currency reserves: sales stock market, 150, 159, 162 intervention, 156, 163 250 Index strategies preferences about, 17 structural reform, 45–46 structural reforms, 6, 47, 191, See also internal adjustment sudden stops, 5, 187, 190 surplus countries, 4, 29 survey data, 22, 55, 57 firm-level, 23, 80 individual-level, 22, 57 taiwan, 24, 145–54, 178, 222 economic developments, 146–48 external adjustment, 147, 153 foreign reserve sales, 147, 152 politics, 153 vulnerabilities, 148–51 tax increases See fiscal policy Thailand, 25, 134–45, 178, 222 delayed adjustment, 1, 135, 142 economic developments, 134–36 external adjustment, 136, 144 financial sector, 138, 140 foreign reserve sales, 136, 143 policy choices, 141–44 politics, 143, 145 vulnerabilities, 137–41 timing of adjustment See also delayed adjustment tradables sector, 36, 220, See also exporters; import-competing sector type of adjustment See adjustment strategies uncertainty, 12, 19, 113, 119 unemployment, 48, 189, 191, 201, 217 unholy trinity, 9, 16 vote share, 121, 122, See also elections voters, 30, 114–21, See also economic voting; elections; public opinion; retrospective voting attention to economic developments, 118, 120 evaluation of incumbent, 29, 116, 145, 177, 206, 209 propensity to reelect incumbent, 116, 120 shortsighted behavior, 117–21 vulnerabilities distribution of, 168 vulnerability, 14–17, 193, See also individual countries; overall vulnerability; vulnerability profile to any adjustment, 51, 106, 123, 127, 141, 172, 221 direct, 75, 137, 139, 148, 150, 156, 159, 168, 170, 193–95, 199–200 distribution of, 84, 137, 148, 156 indirect, 78, 137, 139, 148, 150, 157, 160, 168, 170, 196–99, 201–204, See also employment-specific effects of adjustment; general economic effects of adjustment measurement, 60, 62, 83–88 overall See overall vulnerability self-perceived, 84 vulnerability profile, 49–52, 140, 151, 161, 171, 204, See also individual countries; overall vulnerability effect on voting decision, 116 effects on policy choice, 17–20, 121, 123, 126, 185, 221 subentry of firms, 100 Vulnerability, distribution of See vulnerability profile Wage cuts, 189 wage reductions, 201 war of attrition, 12 World Bank, 191 World Business Environment Survey (WBES), 80–81 Other Books in the Series (continued from page iii) Kelly H Chang, Appointing Central Bankers: The Politics of Monetary Policy in the United States and the European Monetary Union Peter Cowhey and Mathew McCubbins, eds., Structure and Policy in Japan and the United States: An Institutionalist Approach Gary W Cox, The Efficient Secret: The Cabinet and the Development of Political Parties in Victorian England Gary W Cox, Making Votes Count: Strategic Coordination in the World’s Electoral System Gary W Cox and Jonathan N Katz, Elbridge Gerry’s Salamander: The Electoral Consequences of the Reapportionment Revolution Raymond M Duch and Randolph T Stevenson, The Economic Vote: How Political and Economic Institutions Condition Election Results Jean Ensminger, Making a Market: The Institutional Transformation of an African Society David Epstein and Sharyn O’Halloran, Delegating Powers: A Transaction Cost Politics Approach to Policy Making under Separate Powers Kathryn Firmin-Sellers, The Transformation of Property Rights in the Gold Coast: An Empirical Study Applying Rational Choice Theory Clark C Gibson, Politicians and Poachers: The Political Economy of Wildlife Policy in Africa Avner Greif, Institutions and the Path to the Modern Economy: Lessons from Medieval Trade Stephen Haber, Armando Razo, and Noel Maurer, The Politics of Property Rights: Political Instability, Credible Commitments, and Economic Growth in Mexico, 1876–1929 Ron Harris, Industrializing English Law: Entrepreneurship and Business Organization, 1720–1844 Anna L Harvey, Votes Without Leverage: Women in American Electoral Politics, 1920–1970 Murray Horn, The Political Economy of Public Administration: Institutional Choice in the Public Sector John D Huber, Rationalizing Parliament: Legislative Institutions and Party Politics in France John E Jackson, Jacek Klich, and Krystyna Poznanska, The Political Economy of Poland’s Transition: New Firms and Reform Governments Jack Knight, Institutions and Social Conflict Michael Laver and Kenneth Shepsle, eds., Cabinet Ministers and Parliamentary Government Michael Laver and Kenneth Shepsle, eds., Making and Breaking Governments: Cabinets and Legislatures in Parliamentary Democracies Margaret Levi, Consent, Dissent, and Patriotism Brian Levy and Pablo T Spiller, eds., Regulations, Institutions, and Commitment: Comparative Studies of Telecommunications Leif Lewin, Ideology and Strategy: A Century of Swedish Politics (English Edition) Gary Libecap, Contracting for Property Rights John Londregan, Legislative Institutions and Ideology in Chile Arthur Lupia and Mathew D McCubbins, The Democratic Dilemma: Can Citizens Learn What They Need to Know? C Mantzavinos, Individuals, Institutions, and Markets Mathew D McCubbins and Terry Sullivan, eds., Congress: Structure and Policy Gary J Miller, Managerial Dilemmas: The Political Economy of Hierarchy Douglass C North, Institutions, Institutional Change, and Economic Performance Elinor Ostrom, Governing the Commons: The Evolution of Institutions for Collective Action Daniel N Posner, Institutions and Ethnic Politics in Africa J Mark Ramseyer, Odd Markets in Japanese History: Law and Economic Growth J Mark Ramseyer and Frances Rosenbluth, The Politics of Oligarchy: Institutional Choice in Imperial Japan Jean-Laurent Rosenthal, The Fruits of Revolution: Property Rights, Litigation, and French Agriculture, 1700–1860 Michael L Ross, Timber Booms and Institutional Breakdown in Southeast Asia Shanker Satyanath, Globalization, Politics, and Financial Turmoil: Asia’s Banking Crisis Norman Schofield, Architects of Political Change: Constitutional Quandaries and Social Choice Theory Norman Schofield and Itai Sened, Multiparty Democracy: Elections and Legislative Politics Alberto Simpser, Why Governments and Parties Manipulate Elections: Theory, Practice, and Implications Alastair Smith, Election Timing Pablo T Spiller and Mariano Tommasi, The Institutional Foundations of Public Policy in Argentina: A Transactions Cost Approach David Stasavage, Public Debt and the Birth of the Democratic State: France and Great Britain, 1688–1789 Charles Stewart III, Budget Reform Politics: The Design of the Appropriations Process in the House of Representatives, 1865–1921 George Tsebelis and Jeannette Money, Bicameralism Georg Vanberg, The Politics of Constitutional Review in Germany Nicolas van de Walle, African Economies and the Politics of Permanent Crisis, 1979–1999 John Waterbury, Exposed to Innumerable Delusions: Public Enterprise and State Power in Egypt, India, Mexico, and Turkey David L Weimer, ed., The Political Economy of Property Rights: Institutional Change and Credibility in the Reform of Centrally Planned Economies ... Analysis of Property Rights, 2nd edition Yoram Barzel, A Theory of the State: Economic Rights, Legal Rights, and the Scope of the State Robert Bates, Beyond the Miracle of the Market: The Political... (continued after Index) For Jörn, Nils, and Lukas Financial Crises and the Politics of Macroeconomic Adjustments Stefanie Walter University of Zurich 32 Avenue of the Americas, New York ny 10013-2473,... increases the costs of external adjustment, it also increases the economy’s vulnerability to capital outflows and the likelihood of a drop in the value of the currency One of the main conclusions of