The Political Sources of Crisis Situations
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abstract
When are financial crises most likely to occur? The answer seems to be under a fairly wide set of circumstances. They occur in rich countries as well as poor. They seem to be endemic in the contemporary global capitalist economy, but they occurred hundreds of years before the industrial revolution. While predicting crises is difficult, there are identifiable factors that seem to set the stage. This chapter reviews the political correlates of financial crisis and explores the link between such crises and monetary and fiscal policies. It pays particular attention to whether macroeconomic imbalances are more likely when the exchange rate is flexible and capital is mobile and whether the situation is most dire when these structural features are combined with an independent central bank and a right-wing government.