The Political Economy of the Cost of Foreign Exchange Intervention

Dutt, Devika

doi:10.7275/23069867

Cited by 1 publication

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“…Opposing this positive view of LCBM development, several recent contributions highlight the political and economic costs and persistence of constraints on macroeconomic policy autonomy among governments and central banks in the context of IFS (e.g. Dutt, 2021;Kaltenbrunner and Painceira, 2020;Musthaq, 2021b). Our analysis of monetary policy in selected African countries -especially during the COVID-19 pandemic -resonates with this critical literature.…”

Section: Monetary Policy Effectiveness and Macroeconomic Policy Autonomymentioning

confidence: 56%

Local Currency Bond Markets in Africa: Resilience and Subordination

Dafe,

Kaltenbrunner,

Kvangraven

et al. 2023

Development and Change

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This article examines the development and implications of local currency bond markets (LCBMs) in African countries in the context of international financial subordination (IFS). Despite the promotion of LCBMs as a solution to debt vulnerability, there is a dearth of research that offers a systematic empirical examination of their actual benefits along with conceptual explanations as to when and why such benefits may or may not materialize. This is especially true for countries at the bottom of the global economic hierarchy. To explore how the subordination in global production and financial systems shapes LCBM development, the article offers an empirical analysis of selected African countries that combines interviews with policy makers, officials and experts with statistical data. The findings suggest that while LCBMs offer some benefits, such as mitigating risks associated with foreign currency debt, their potential is limited by the structural processes created by IFS, such as their dependence on the global financial cycle, the relatively higher costs of this debt and the sustained constraint on macroeconomic policy making. However, there are also domestic factors which shape how these structural constraints are mediated in the context of LCBM development — in particular, historically developed financial structures of developing countries, the political economy of the state and the structure of production. This study thus contributes to the debate about the developmental benefits of domestic debt market development and the emerging research agenda on IFS.

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Section: Monetary Policy Effectiveness and Macroeconomic Policy Autonomymentioning

confidence: 56%