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Economic Welfare, International Business and Global Institutional Change

Edited by Ram Mudambi, Pietro Maria Navarra and Giuseppe Sobbrio

The distinguished authors in this volume address the fundamental causes for such heterogeneous international experiences, placing particular emphasis on the role of institutions. They demonstrate how the study of economic development is increasingly linked to the development of institutions, which allow for more complex exchanges to occur in markets and societies. Institutions can be understood as rules or constraints that channel individuals' actions in specific directions, and can be formal or informal depending on their genesis. The book highlights the connection between institutions and economic welfare by examining countries at different stages of development. Although the authors' study material effects, they also look at individual well-being which is more strongly influenced by the non-material products of institutions such as opportunity, freedom and relationships. They move on to highlight the role of institutions in global business, in terms of innovation, entrepreneurship and foreign direct investment. In the concluding chapters they focus on the actual process of transition from one institutional framework to another. Amongst other examples, they examine reforms to international financial institutions and constitutional adjustments in transition countries.
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Chapter 13: The Role of International Monetary Institutions after the EMU and the Asian Crisis: Some Preliminary ideas using Constitutional Economics

Friedrich Schneider


* Friedrich Schneider 1. INTRODUCTION After the Asian Crisis a new situation has arisen for the possible intervention of international financial institutions – especially due to the severe criticisms of many economists, politicians and other public officials in which they pointed out the ineffective or even contraproductive interventions of the IMF (regardless of whether such a criticism can be justified or not!). Also a lot of voices have been raised arguing that either one should abolish the IMF or give it some effective and powerful means in order to intervene with less difficulty. The international monetary institutions (like the IMF, the World Bank, and so on) will thus face new challenges and should react to this (compare Section 2). In Section 3 some theoretical ideas are put forward on how a new international monetary institution should operate. With the help of constitutional economics it will be shown what such a monetary institution could look like, in order to operate much more efficiently and react more properly to major financial economic crises like the Asian one. In Section 4 some elements of a ‘new’ institutional design of an international monetary system are developed, in which a new structure will be derived, for example what the major tasks should be and how this ‘reformed’ institution should operate. Section 5 gives a summary of the main results and draws some conclusions. * This chapter was presented at the conference ‘The Political Economy of Institutional Development: Institutional Design in Periods of Rapid Change’, Messina, 14–17 September...

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