Chapter 2 expands on economic drivers of welfare nationalism, the long-term structural trends that produced a “toxic mix of immigration and austerity,” which in turn drove exclusion of migrants in Europe and Russia after 2000. It identifies causes for the post-1990 explosion of international migration in both regions: the collapse of communist governments, rapid expansion of the European Union, and multiple crises in the Middle East and North Africa. The motivations and scale of the three major exclusionary migrations to Europe and Russia are covered. The chapter then turns to structural decline of labor markets and welfare states over recent decades. It tracks growing labor precarity s because of increases in non-standard and informal employment, growing exclusion of nationals from social insurance systems, and welfare state retrenchment. The 2008 global financial crisis, the 2011 Euro Crisis, and the recessions in Russia after 2012 are shown to further drive austerity. The chapter connects nationals’ welfare losses with grievances and appeals that are prominent in welfare nationalist discourse. . Declines in social security and welfare of nationals are shown to affect politics, alienating European electorates from mainstream parties and leaving postcommunist societies disillusioned with the West.

To date, research on Latin American central banks in the interwar years has focused on their loss of autonomy due to the slump and subsequent implementation of innovative, countercyclical monetary policies. These policies, although fostering economic recovery, led to higher rates of inflation and exchange-rate volatility. The chapter shows that these policies resulted from more than loss of autonomy and subordination of central banks to governments. In fact, the need for countercyclical monetary policies had been foreseen by foreign advisors to newly established central bank before and during the crisis, but Latin American central bankers had been reluctant to implement them for fear of damaging the credibility of the gold-standard regime. This finally changed with the collapse of the gold exchange standard. In the 1930s, central banks had become effective actors, channeling credit to the real economy and supporting the emergence of state institutions that would promote the development of local industry.

Crises typically originate in financial overshoot as mounting debt becomes unsustainable. Despite centuries of catastrophic experience with this phenomenon, policymakers have not figured out how to consistently avoid it. A strong human tendency to rationalize excess seems to impede recognition of a problem until it’s too late, in a "this time is different" mentality. Crisis situations put monetary and fiscal policy to their ultimate test. The Asian Financial crisis rolled across the region in 1997. As the epicenter, Thailand offers a window into the incubation and eruption of a financial crisis and lessons learned about policy response. From 2020, a crisis of a different sort has unfolded in the form of a shock to the real economy from a pandemic. The policy response to this crisis has differed greatly among Emerging East Asian economies with constraints on policy bearing on options.

This study explores the fragmented contemporary international legal instruments and practice relevant to sovereign defaults and has examined the question of whether and to what extent these instruments and practice can be reconceptualised as a regulatory framework for sovereign debt restructuring.

This study has pursued a balance between bondholder protection and respect for sovereign debt restructuring at various stages of litigation and arbitration proceedings. An appropriate balance inevitably depends on the context and circumstances of specific cases and cannot, by its nature, be articulated in a precise manner. Instead, the present study has pursued a framework within which an appropriate balance may be explored and attained in specific cases. Such a framework is constructed by applicable contract, statutory and treaty provisions to be interpreted in a manner that certain deference is paid to debtor sovereigns’ policy decision-making during debt restructuring and that the chance of checks and balances by courts or tribunals is ensured.

During the 2008–9 global financial crisis, credit default swaps created conduits in the financial system which facilitated the transmission of systemic risk. In response, the Financial Stability Board recommended over-the-counter derivative clearing through a central clearing counterparty. Although the Securities and Futures Commission is the designated supervisor and resolution authority for Hong Kong’s central clearing counterparty, OTC Clear, its supervisory ambit, capacity, and powers are insufficient to mitigate systemic risk and manage financial stability. This chapter argues that a securities supervisor is not the optimal supervisor or resolution authority for OTC Clear. Central clearing counterparties require credit and liquidity risk management which aligns more with banking supervision and central banking. This is supported by the dominance of foreign exchange and interest rate derivatives being traded in Hong Kong. The optimal resolution authority for OTC Clear is the Hong Kong Monetary Authority, being the resolution authority for systemically important banks, having monetary authority expertise that aligns with foreign exchange and interest rate risks, experience in mitigating credit and liquidity risks, and being designed to manage financial stability.

Banks fail when an illiquidity event depletes capital reserves. Liquidity is sourced from assets that can readily be transformed into cash or from wholesale funding markets and central banks. Basel III strengthens bank balance sheets by allowing supervisors to release capital and liquidity reserves during times of market liquidity stress. This chapter analyzes the implementation of the Basel III capital and liquidity reforms in Hong Kong, banking sector stability during the 2008–9 global financial crisis and the Covid-19 pandemic, and systemic supervision. Hong Kong is a unique international financial centre because it is overwhelmingly populated by domestic systemically important banks. Universal banking and Basel III compel banking sector supervision of Hong Kong’s securities and insurance sectors, despite falling outside the supervisory design of the Hong Kong Monetary Authority. This chapter argues that different supervisory structures and models affect the regulation and supervision of financial stability in Hong Kong’s banking sector. Insurance and wealth management products in the banking industry can produce systemic risks that might be overlooked by the Hong Kong Monetary Authority. Supervisory bias towards the banking sector in conjunction with cross-sectoral underlap could cause financial instability and a systemic banking crisis in Hong Kong.

This chapter provides a brief financial history of Hong Kong’s financial regulation and financial crises between 1841 and 1997. In the beginning, financial markets were subject to market-based regulation and the British colonial legal influence. Hong Kong took a long time to embrace financial regulation. The chapter argues that Hong Kong’s financial markets and the origins of financial regulation have developed, evolved, and shaped in response to a series of financial crises. Hong Kong underwent extensive market and regulatory change when the first modern banking crisis and stock market crash battered the economy between the mid-1960s and the early 1970s. The deposit-taking company and banking crises of the 1980s provided the impetus to develop the current regulatory and supervisory architecture. By 1997, subsequent regulatory reforms had shaped this architecture to resemble other developed financial centres, with the banking, securities, and insurance sectors having a designated supervisor and ordinance.

Financial crises have a tendency to expose the financial system’s inability to absorb large systemic shocks, the critical role of liquidity channels, and financial institutions with fragile balance sheets. Pinpointing the causes of systemic risk challenges supervisors because the range of risks are virtually unlimited. This chapter argues that the definition of financial stability must be revisited to enhance the efficacy of financial supervision by drawing upon the lessons learnt from the 2008–9 global financial crisis. Defining systemic risk requires a real-time perspective of risk transmissions between the financial system components. Supervisors should appreciate financial agglomeration, the interconnectedness of the financial system, and behavioural economics when regulating systemic risk. Liquidity mismatches that destabilize financial institutions’ balance sheets and the capacity to raise funding can cause financial instability. The inability of the Hong Kong Monetary Authority to control monetary policy constrains its power to fully manage these liquidity risks. Mitigating financial instability caused by systemic liquidity risks requires an understanding of prudential regulation and the management of monetary policy to stabilize bank balance sheets. Financial architecture must be properly utilized by supervisors to restore the orderly and rational functioning of the financial system.

In this chapter we survey the history of international finance spanning a century and a half. We start by characterizing capital flows in the long run, organizing our discussion around six facts relating to the volume and volatility of capital flows, measured in both net and gross terms. We then connect up the discussion with exchange rates and monetary policies. The organizing framework for this section is the macroeconomic trilemma. We describe where countries situated themselves relative to the trilemma over time and consider the political economy of their choices. Finally, we study the connections between international finance and economic and financial stability. We present consistent measures of growth and debt crises over the century and a half covered in this chapter and discuss how their incidence is related to those institutional and political circumstances, and, more generally, to the nature of the international monetary and financial regime.

The progressive globalization of finance over the last forty years has been a blessing and a curse for national financial systems. On the one hand, financial institutions, investors, and consumers benefitted from increased opportunities of credit and investment. On the other hand, financial interconnectedness and the reduction of barriers to capital flows have increased exponentially the risk of global financial crises. Regulatory cooperation among financial regulators through the various Transnational Regulatory Networks has decreased the risk of regulatory loopholes and avoided races to the bottom in financial policymaking. Yet, the global financial crisis of 2008 and the European Sovereign Debt crisis have shown that the current approach to global financial governance presents various flaws. The absence of a binding international legal framework for financial cooperation, coupled with the inherent pressure towards financial nationalism faced by national regulators often leads to failures of cooperation and, ultimately, to international crises. This chapter discusses how public international law and the doctrine of Common Concern can help in addressing the inefficiencies of the current system.

This chapter provides an introduction to economic crises. It describes a number of different types of crises and defines both contagion and systemic risk. It analyzes balance of payments and currency crises, the Asian crisis, and the global financial crisis. It takes up the potential roles of prudential regulation and currency controls in helping to prevent crises.