Currency Crises in Emerging Markets is a somewhat unique book on the foreign currency exchange market, bringing together a number of separate papers by separate authors to more closely examine the currency crisis experiences of the late 1990’s. Even more interesting for the reader are the primary focus of these discussions; rather than the more common examinations of currency issues in Asia and Latin America, this book focuses on the currency issues of emerging economies in Eastern Europe, Central Europe, and the new countries created from the former Soviet Union.
The discussions presented in the series of papers are fresh and to the point, looking at a number of issues and arguments over the ongoing debates on currency policy in the emerging economies of these relatively new national economies. Particular attention is given to the political, economic, and social consequences of currency instability, uncertainty, and crisis. With this in mind, the papers in this book offer a number of interesting thoughts and recommendations on the most effective ways to take existing theoretical models, adapt them to the specifics of each situation, and enact policies designed to maintain strength and stability on the foreign currency exchange market.
Compilation and preparation of this book
Unlike other compilation books that are typically prepared in Western Europe or the United States, Currency Crises in Emerging Markets was compiled and prepared in Warsaw, Poland, but the Center for Social and Economic Research (CASE). The editor, Marek Dabrowski, is well known as a leading thinker and participant in activities related to financial and economic issues in a variety of countries. Dabrowski’s resume and experience are impressive, including serving as the first deputy minister of finance when Poland emerged from behind the “iron curtain” in 1989, serving as a member of the Polish parliament, and being an active member of the National Bank of Poland’s Monetary Policy Council.
Over the last twenty years, Dabrowski has expanded his expertise and professional activities through a variety of consulting opportunities. These have included conducting detailed policy research, making policy recommendations, and helping to advise over twenty different countries across Europe, North Africa, and the Middle East. He has also been part of numerous internationally recognized research projects focused on a variety of specific areas of fiscal policies, currency policies, transitional economies, and the like.
In the field of foreign currency exchange trading, Dabrowski is among those whose expertise and influence is well respected.
Variety of topics covered in the content
Currency Crises in Emerging Markets is also quite interesting because it includes a variety of topics in the content, each covered in a way that is clear and thoughtful. Here are some examples of the information and discussion items you will find in this book:
- Overview of Currency Crises in Emerging Market Economies (written by Marek Dabrowski)
- Predicting Currency Crises, the Role of Multiple Equilibria and the Contagion Effect (contributed by Marcin Sasin)
- International Liquidity and Currency Crisis Costs (contributed by Mateusz Szczurek)
- Currency Crises in the Context of Exchange Rate Regime Choice (contributed by Malgorzata Jakubiak)
- Currency Crises and Fiscal Imbalances – Transition Countries’ Perspective (contributed by Joanna Srwinska)
- Propagation of Currency Crises – The Case of the Russian Crisis (contributed by Lukasz Rawdanowicz)
- The Economic and Social Consequences of Currency Crises (contributed by Monika Blaszkiewicz and Wojciech Paczynski)
- The Failure of the IMF in Preventing Currency Crises in CIS Countries (contributed by Rafal Antczak, Malgorzata Markiewicz and Artur Radziwill)
- Case Study: The Bulgarian Currency Crisis of 1996-1997 (contributed by Georgy Ganev)
- Case Study: The Czech Currency Crisis of 1997 (contributed by Julius Horvath)
- Case Study: The Russian Currency Crisis of 1998 (contributed by Rafal Antczak)
- Case Study: The Ukrainian Currency Crisis of 1998 (contributed by Malgorzata Markeiwicz)
- Case Study: The Moldovan Currency Crisis of 1998 (contributed by Artur Radziwill)
The titles of each of these contributions may sound a bit complex because the issues they address are a bit complex; however, the writing is generally quite clear and easily understandable, making these contributions interesting, informative, and useful.
A closer look at the author’s intent and discussions
Now that we have looked at the topics addressed in Currency Crises in Emerging Markets, it’s worthwhile to take a closer look at Marek Dabrowski’s thoughts and intent for compiling this volume of information. His main purpose is to bring a new perspective to currency crises and the foreign currency exchange marketplace by examining events and activities in the transitional economies of Central Europe, Eastern Europe, and the countries that emerged from the former Soviet Union. He makes it clear, however, that his broad intent and goal is to draw attention to the growing importance of these areas and to make the case for more academic, scholarly, and professional work focused on these areas. Additionally, Dabrowski draws some overall conclusions and uses them to offer some well thought out recommendations regarding the role of the IMF and specific national economic policies of the countries profiled and discussed.
The background and history set forth by Dabrowski is concise yet powerfully informative. He makes the point that financial crises have occurred throughout history, but the full blown catastrophe of complete crashes of currency did not become numerous until about the middle of the 20th century. Why? Because prior to that point there were just a few very robust national currencies that dominated the global monetary structure, each of them based on a very strong gold standard. They were so strong, in fact, that disruption only occurred when extremely large and disruptive events occurred, such as the Great Depression, World War I, or World War II.
Changes in the post World War II global monetary system
After World War II, however, when the global monetary structure abandoned the direct use of the gold standard, the financial system underwent dramatic changes in structure and stability. Each country’s currency, instead of being supported by the gold standard, was instead primarily supported by that nation’s economic performance and policies. This inevitably created greater volatility and instability for individual currencies as well as for the overall global monetary system. The Bretton Woods system attempted to counteract some of this unevenness by implementing what has been called an “indirect” gold standard and operating with the ultimate goal of maintaining currency stability, but within a couple of decades the system collapsed in and on itself.
The situation was made exponentially more complex and difficult with the widely varying currency goals established by individual countries. Policies and actions were no longer set and executed with the end goal being currency stability in all cases, creating uncertainty and volatility that has previously not been as pronounced in the foreign currency exchange markets. What’s more, a great number of newly independent countries with new currencies emerged onto the global monetary scene. As previously colonized areas in Latin America, Africa, and Asia, achieved independence from their former colonial ties, and the former Soviet Union broke apart into separate entities, their efforts to establish and maximize the value of their own individual currencies created even more volatility in the foreign currency exchange marketplace.
A series of large and difficult crises
This unstable and financially explosive situation led directly to a number of very large currency crises involving Britain, Italy, Mexico, and Argentina. Additional crises emerged shortly thereafter in Southeast Asia, involving countries such as Thailand, the Philippines, Malaysia, Indonesia, Hong Kong, Korea, Taiwan, and Singapore. The turmoil spread even further to affect the emerging countries and markets in Russia, the Ukraine, Georgia, Moldova, Kazakhstan, Tajikistan, Belarus, Uzbekistan, Kyrgyzstan, and others. Brazil eventually experienced currency problems as the effects of these crises continued to spread around the globe.
The aftermath of these tremendous crises made it abundantly clear that globalization of currency markets, economies, capital markets, and the like has led to a truly global economy that many of our theoretical and practical applications simply cannot deal with effectively and consistently. Dabrowski makes the point that the situation has prompted many entities to call for some sort of global regulation and oversight of currency markets and related trading policies, but this approach is not a political possibility at this time. There is still too much fracturing and dissent among nations with widely varying currency goals, making the design and execution of greater regulation and controls a seriously unlikely prospect.
Defining a currency crisis
In the old global monetary structure it was relatively easy to define and identify a currency crisis, but that is no longer the case. The fluidity and fragmentation of the foreign currency exchange system makes it extremely difficult to establish widely agreed upon standards for defining and identify a currency crisis in the modern environment.
Dabrowski makes the case that existing definitions and terminology associated with currency crises is not specific enough or precise enough to effectively capture events in the modern foreign currency exchange marketplace. Any number of variations on economic crises, such as a financial crisis, a balance of payments crisis, a banking crisis, a public debt crisis, and the like, can have a powerful effect on currency exchange and overall currency crises. Many of these types of crisis overlap with each other and influence each other, making it increasingly difficult to clearly identify which elements belong to which crisis and what effects are directly caused by a particular crisis.
A number of scholars, professionals, and academics have focused their attention and energy on creating an accurate and effective set of definitions for a variety of crises, but the issue is complicated and difficult. So far there are no widely accepted definitions in use, although there are many that have been suggested and that have their individual supporters. Dabrowski does not attempt to propose his own definition or make the case for one definition over another, but rather has pulled together an interesting set of contributions from a variety of contributors in an effort to lay out the issues clearly and allow the reader to draw their own conclusions.
Final thoughts
Currency Crises in Emerging Markets is a well designed and well written collection of information and discussion about currency crises in areas of the world that have not received nearly as much attention as those that have occurred in Latin America and Asia. The author, Marek Dabrowski, makes a concerted effort to focus attention on currency crises and issues in Eastern Europe, Central Europe, and the countries that emerged from the former Soviet Union. This book is one of the few available that offer such comprehensive and clear examination of these lesser studied currency crises.
By using a range of contributions from a range of recognized experts, Dabrowski succeeds in making Currency Crises in Emerging Markets a powerful resource for understanding and learning more in depth information about these important events. This is especially critical for readers to add to their knowledge and expertise because of the tremendously interrelated global currency markets. Anyone who wants to understand the modern foreign currency exchange markets and the larger aspects of the global monetary system simply cannot afford to ignore these emerging markets.
Currency Crises in Emerging Markets is an excellent resource for this purpose, allowing the reader to investigate and learn about this critically important subject in a way that is well written, well organized, and easily understandable. It is well worth acquiring, reading, and adding to your library of informational resources on broader aspects of the foreign currency exchange markets.