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I offer this article as a small way of honoring my friend, mentor, and role model Jim Crotty, whose intellectual legacy, commitment to engaged scholarship, lived experience, and warmth and generosity continue to influence me profoundly. Here, I offer several observations and speculations on the state of play in the global and US financial systems in a Crottyian vein. These include several 1980s throwbacks—bank failures in the United States; rentier-driven tight monetary policies across the world with attendant negative effects; and, debt distress and the likelihood of a (new) "lost decade" in the Global South. These familiar experiences are unfolding against the backdrop of an interregnum in which a "post-American global financial order" is emerging in an environment marked by "productive and destructive incoherence." JEL Classification: F02, F33, O23, E44, E58 [ABSTRACT FROM AUTHOR]

This article introduces the problematic situation of the great German banks and some non-German banks during the so-called second globalization since the 1970s. It formulates the questions that should be answered in the following contributions, each for a particular bank or group of banks. The most important overarching questions are firstly, to what extent banks were the driving force in the interconnectedness of cross-border money and capital flows and, secondly, to what extent they acted as triggers of the severe financial and/or sovereign debt crises during the last half century.

This paper examines how the internal–external composition of government debt affects the government's borrowing policy, sovereign risk, and welfare in a small open economy. To this end, I develop a dynamic stochastic general equilibrium model with endogenous default risk that includes both external and domestic debt. I calibrate the model to Argentina, and I show that the model closely reproduces key empirical moments. Moreover, I highlight the existence of an externality that distorts debt composition: Domestic debt levels are inefficiently low and default risk is inefficiently high. The welfare loss associated with the externality is roughly 0.7% when it is measured in permanent units of consumption. A Pigouvian subsidy that incentivizes domestic purchases of government bonds restores efficiency. [ABSTRACT FROM AUTHOR]

One of the reasons many countries decide to maintain fixed exchange rate regimes is the fear of wide exchange rate fluctuations. This aversion stems from the idea that monetary instability affects a country's ability to pay, especially if the denomination of debt is predominantly foreign currency. While the literature has focused on short and recent periods, this study adopts a long-term approach. It analyzes the link between debt and monetary crises between 1870 and 1957 in a sample of Latin American countries. We find that low exchange rate stability has contrasting effects on debt crisis frequency. In the 19th century, the exchange rate had modest effects on the occurrence of defaults, and it had no effect on the decision of governments to default during the interwar period. In the 19th century, debt and monetary crises did not always coincide. In both periods, the level of public debt relative to gross domestic product (GDP) and, to some extent, the behavior of the terms of trade were more important variables behind the incidence of defaults. Finally, we show that in the period after World War II, monetary stabilization largely preceded negotiations with debt bondholders. This long-term perspective relativizes the importance of exchange rate stability in the risk of default. [ABSTRACT FROM AUTHOR]

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With limited fiscal space, MENA governments with flexible exchange rates have been relying extensively on accommodative monetary policy to circumvent external shocks such as Covid 19 and other domestic macroeconomic imbalances. Other MENA countries with high debt levels and fixed exchange rates are not able to use conventional monetary policy effectively. We use a battery of econometric models to identify domestic and external nominal shocks affecting the MENA region and their dynamic transmission mechanisms through impulse response functions and granger causality tests derived from a structural VAR. Once the nature of those shocks is identified, we formulate appropriate macroeconomic policy responses to mitigate their effects. We show that shocks to Saudi Arabia's macroeconomic fundamentals and oil prices have a significant impact on MENA countries' GDP, inflation, and interest rates. In the absence of an effective conventional monetary policy, MENA central banks will have to rely more on non-conventional monetary policy tools. [Display omitted] • MENA countries with high debt levels and fixed exchange rates are not able to use monetary policy effectively. • We use a battery of econometric models with quarterly data to identify domestic and external nominal shocks impacting the MENA region and their dynamic transmission mechanisms. • Our empirical results indicate that MENA countries remain vulnerable to regional external and oil price shocks. • Shocks to Saudi Arabia's macroeconomic fundamentals and oil prices have a significant impact on MENA countries' inflation, GDP, and interest rates. • In the absence of an effective monetary policy MENA central banks will have to rely more on non-conventional monetary policy tools. [ABSTRACT FROM AUTHOR]