The paper provides an account of the meaning and implications of TARGET2 in the eurozone (EZ) balance of payments crisis. In this context, it discusses Hans-Werner Sinn's thesis about a stealth bail-out of the EZ periphery by the ECB from a heterodox perspective. Financial liberalisation, a...

This paper attempts to explain the role of capital inflows in creating economic booms and busts in a small open economy with sovereign currency. We develop a stock–flow consistent (SFC) model for a small open economy while relying on the experience of the Icelandic crisis. We demonstrate the...

This paper investigates the spread of what started as a crisis at the core of the global financial system to emerging economies. While emerging economies had exhibited some resilience through the early stages of the financial turmoil that began in the summer of 2007, they have been hit hard...

This paper contrasts the orthodox approach with an alternative view on finance, saving, deficits, and liquidity. The conventional view on the cause of the current global financial crisis points first to excessive United States trade deficits that are supposed to have 'soaked up' global savings....

It is commonplace to link neoclassical economics to 18th- or 19th-century physics and its notion of equilibrium, of a pendulum once disturbed eventually coming to rest. Likewise, an economy subjected to an exogenous shock seeks equilibrium through the stabilizing market forces unleashed by the...

We develop an aggregate demand analysis of a small open economy based on all agents' dynamic optimization. Murota and Ono (2015) present a simple Keynesian cross analysis with dynamic optimization. This paper extends it to a small-country setting with two factors and two commodities, of which...

This paper proposes an integrated framework to analyze jointly two key issues: the emergence of global imbalances and the precautionary motive for accumulating reserves. Standard models of general equilibrium would predict modest current account surpluses in the emerging markets if they face...

External capital inflow on a massive scale into the emerging market economies is a very significant phenomenon of recent years. Making distinctions between direct investment, real and financial, and portfolio investment and incorporating crowding in or crowding out effects we derive some results...

This paper contrasts the orthodox approach with an alternative view on finance, saving, deficits, and liquidity. The conventional view on the cause of the current global financial crisis points first to excessive United States trade deficits that are supposed to have “soaked up” global...

This paper investigates the spread of what started as a crisis at the core of the global financial system to emerging economies. While emerging economies had exhibited some resilience through the early stages of the financial turmoil that began in the summer of 2007, they have been hit hard...