Macro- and Monetary Economics

In 1940 few Americans had heard of mutual funds. Today, US mutual funds are the largest financial industry in the world, with over 88 million shareholders and over $11 trillion in assets. This book describes the developments that have produced mutual funds' long history of success. Among these are: the formation of the first mutual funds in the 1920s; how the 1929 stock market crash, a disaster for most financial institutions, spurred the growth of mutual funds; the establishment in 1934, over FDR's objection, of the United States Securities and Exchange Commission, the federal agency that regulates mutual funds; and the enactment of the Revenue Act of 1936, the tax law that saved mutual funds from extinction. In addition the book details the passage of the Investment Company Act of 1940, the “constitution” of the mutual fund industry; the creation in 1972 of money market funds, which totally changed the mutual fund industry and the entire US financial system; the enactment of the Employee Retirement Income Security Act of 1974, which created Individual Retirement Accounts; the accidental development of 401(k) plans, which have revolutionized the way Americans save for retirement; and the 2003 trading abuses, the greatest scandal ever in the history of the mutual fund industry. Many events have never been discussed in detail; others have been discussed in works on other subjects.

This is a guide to the processes that led to the creation of the European single market and the signing of the Maastricht Treaty in 1992. The 2000 edition has only a few changes, but has been expanded six years after the original publication date to assess the economic, monetary, political, and institutional significance of the euro. It also reconsiders the rationale and underlying philosophy of European Monetary Union (EMU) in the light of the developments of the previous decade. A central theme is the proposition that a group of sovereign countries cannot for long sustain free trade, unrestricted capital movements, fixed exchange rates, and full autonomy of national macroeconomic policies, so they need to move towards monetary union and a single currency. Issues that are extensively discussed include the single currency, the tasks of a European Central Bank (ECB), the European Currency Unit (ECU), the role of budgetary rules, currency competition, and the relationship between the EMU and political union. Appendices contain extracts from official documents dealing with EMU and an extensive chronology. The book is directed at academic and business economists interested in the issues surrounding EMU, commentators, and policy‐makers.

Current theories of unions are mainly theories of what unions were and did rather than theories of what unions will be and will do. Thus, the purpose of this book is to help make economic thinking about unions in Europe more forward‐looking and to discuss the role that unions are likely to play in the changed economic environment of the new century. The volume consists of two reports that are the results of coordinated efforts by some of the most authoritative scholars in the field. The first study addresses a number of issues related to the question of how the primary role of trade unions—collective bargaining over wages and work conditions—is likely to evolve in the early decades of the new millennium. Starting from the widespread impression of a trend toward weakening union power, the main aspects considered by the analysis are membership, wage effects, organization and presence of unions, bargaining structure, macroeconomic performance, future scenarios, and strategies. The second study investigates the interactions between trade unions, welfare systems, and welfare reforms. The overall theme is the policy dilemma created by the many different activities of trade unions in the field of welfare provision, notably pension policies and unemployment protection.

Throughout the analysis, a tension emerges between the role of unions as voice of atomistic agents and insurance providers—that may contribute to increasing aggregate welfare by remedying market failures—and as rent‐seeking monopolist, underlying the intergenerational conflicts present within unions. The studies point to measures and strategies enhancing this second efficient role of the unions that draws mainly on their capacity to internalize to the employer–employee relationships costs that would otherwise fall on society at large.

The currency crises that engulfed East Asian economies in 1997 and Mexico in 1994 — and their high development costs — raise a serious concern about the net benefits for developing countries of large flows of potentially reversible short-term international capital. This book examines in depth the macroeconomic and other policy dilemmas confronting public authorities in the emerging economies as they deal with short-term capital movements, especially in the period before the outbreak of these crises. The studies are based on comparative case studies of key emerging economies. Valuable insights are also derived from contrasts between the East Asian, Latin American, African, and European experiences, between the financial and real effects of financial flows, and between private and public responsibilities in managing financial markets. This book analytically identifies the weaknesses in both domestic and international capital market regimes. The recommendations derived from this analysis apply to the development of financial markets in developing countries, the monitoring and regulation of mutual funds in source countries, and the future development of international capital markets.

Following the Rio Agreement in 1967, the birth of the Special Drawing Right (SDR) was widely heralded as the first step towards a world international money. The SDR's intended purpose, though, was more modest: to help salvage the prevailing international monetary system which had evolved since Bretton Woods. This volume examines the relatively recent and important history of SDRs—what they are, where they came from, and why they are significant. This book considers the changing roles and influences of the US and the International Monetary Fund (IMF) as post‐Bretton Woods monetary arrangements established themselves. Despite their retreat from early acclaim, work continued, particularly at the Fund, on enhancing the potential of SDRs to contribute to international monetary stability, and SDRs have recently re‐emerged as a potential source of support and stability for the international monetary system underpinning the world economy. The SDR, and the debate surrounding it, is an excellent prism through which to examine other important themes in contemporary international political economy, including international liquidity provision and international monetary reform. Ultimately, the policies of the US, the IMF, and the changing nature of the relationship between them emerge as fundamental themes for an understanding of prospects for SDRs under post‐Bretton Woods international monetary arrangements. Today, the promise and disappointment that has characterized the short history of SDRs is more important than ever as the world again examines these arrangements in the wake of the international financial crisis.

‘A theory of Employment Systems’ explains why there are such great international differences in the way employment relations are organized within the firm. It takes account of the growing evidence of international diversity. It sets out from the theory of the firm first developed by Coase and Simon, and explains why firms and workers should use the employment relationship as the basis for their economic cooperation. The originality of the employment relationship lies in its flexibility. It gives managers the authority to organize work, but it also establishes limits on employees’ obligations. Neither Coase nor Simon dealt with these limits, yet without them, no one would be prepared to work as an ‘employee’, and so there would be no employment relationship, and firms would not exist as employing organizations.

The book argues that these limits are provided by four basic types of employment rule. Which one predominates in a given environment is the source of societal diversity in employment relations. The theory is extended to show why such diversity extends deep into key areas of human resource management, such as performance management, incentive pay, and skill development. It also explains why the open‐ended employment relationship continues to dominate work despite the growth of market‐mediated work relations. The book covers evidence from the US, Japan, France, Germany, and Britain.

The financial crisis, which originated in developed country financial markets, has spread to developing countries and has turned into a global financial meltdown. Governments and Central Banks—though taking many and costly measures—seem powerless to stop the crisis. In light of this major global crisis that is hurting economies across the globe, this highly topical book will focus on a) the transparency and regulatory measures that become desirable after the current crisis; b) the implications of both the crisis and regulatory discussions for developing and developed economies; and c) reforms in the global financial architecture that might make the global financial system more stable and more equitable. Given the depth of the current financial crisis, the world economy is in unchartered territory. As a consequence, this book aims to systematically understand current major problems, both in the financial system, its governance, and in its links to global economic imbalances. It will try to explain how both market actors and regulators behave, as well as the prevailing ideology of extreme financial liberalization without sufficient regulation that contributed to the financial crisis. The book will present radical, but specific and hopefully politically feasible, proposals to try to ensure a more stable, equitable and growing world economy.

This book explores the impact of trade with less developed countries (LDCs) on employment in Europe. It supports the view that trade with LDCs has had limited impact on the labour market. Among its main findings are that trade with LDCs would be less harmful for Europe than for the USA, that the inequality problem in Europe is not wage inequality but the widespread unemployment of unskilled workers, and that technology has contributed to unemployment. The book has nine chapters. The first seven examine the impact of LDC trade on the European labour market; the final two address the social clause problem.

Following fifteen years of Idi Amin, war and civil war, the Ugandan economy was in ruins by the time peace was restored in 1986. Since then Uganda has consistently been one of the fastest growing economies in Africa, leading to a substantial reduction in poverty. This book helps explain how this economic transformation was brought about. Uganda's success has arguably had more influence on development thinking and on the international aid architecture than any other country. The HIPC debt relief initiative, the Paris Declaration on Aid Effectiveness, and the growth of budget support have all been strongly influenced by Ugandan experience and thinking, while Ugandan innovations such as poverty reduction strategies, public expenditure tracking surveys, and virtual poverty funds have been widely adopted elsewhere. Most of the reforms, that transformed the economy, originated inside the Ugandan government during the 1990s, rather than being imposed through donor conditionality. In this book, the architects of those reforms give their personal accounts of the thinking behind the reforms, how they were implemented, and their impact. Individual chapters cover reforms across the spectrum of central government economic policy and management, while Chapter 1 presents an overview and Chapter 2 the institutional and political background.