New Institutional Arrangements for the World Economy

485 Pages·1989·8.061 MB·English

by  Hans-Jürgen Vosgerau (auth.), Professor Dr. Hans-Jürgen Vosgerau (eds.)

Studies in International Economics and Institutions
Editor
Hans-Jiirgen Vosgerau
Advisory Board
John S. Chipman
Elhanan Helpman
Ronald W Jones
Murray C. Kemp
Hans-Jii.rgen Vosgerau (Ed.)
New Institutional
fluTangennentsforthe
World Econonny
With 26 Figures
Springer -Verlag
Berlin Heidelberg New York
London Paris Tokyo
Professor Dr. Hans-Jiirgen Vosgerau
Universitat Konstanz
Sonderforschungsbereich 178
Postfach 55 60
D-7750 Konstanz, FRG
ISBN-13 :978-3-642-83649-7 e-ISBN -13: 978-3-642-83647-3
DOl: 10.1007/978-3-642-83647-3
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© Springer-Verlag Berlin Heidelberg 1989.
Softcover reprint of the hardcover 1st edition 1989
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Introduction to the Series
"Studies in International Economics and Institutions"
Many international economic problems arise from inadequate relations between
economic transactions across national borders and the institutional framework
within which they take place. To analyse the dynamic interdependencies between
international transactions of various kinds and different international institutions is
the aim of the Sonderforschungsbereich 178 "Internationalisierung der Wirtschaft"
at the University of Konstanz, Germany, which has been supported by the Deut
sche Forschungsgemeinschaft since 1986.
The present series is planned to include publications devoted to the analysis of
topics outlined above. It is not restricted to results of the Sonderforschungsbereich
178. It will include monographs, conference proceedings and other collections from
the areas of international economics - theoretical, empirical and applied. In par
ticular, contributions to international public choice and international new-institu
tional economics are welcome. The series will also cover studies in international
law, applying the emerging "law and economics" results to international economic
problems.
The series is edited by the "Sprecher des Sonderforschungsbereichs 178" in co
operation with members of the Sonderforschungsbereich. An advisory board of
consulting editors is being formed. At present it consists of John S. Chipman
(Minneapolis, Minnesota, USA), Elhanan Helpman (Tel Aviv, Israel), Ronald W.
Jones (Rochester, New York, USA) and Murray C. Kemp (Kensington, New South
Wales, Australia).
TABLE OF CONTENTS
Page
INTRODUCTION
New Institutional Arrangements for Hans-Jilrgen Vosgerau 1
the World Economy
I. EXCHANGE RATE STABILIZATION 7
1. A Public Choice Analysis of Strategies
for Restoring International Economic
Stability Thomas D. Willett 9
Comments John S. Chipman 31
2. Implications of Alternative International
Exchange Rate Arrangements for the
Developing Countries Sebastian Edwards 34
Comments Peter Bernholz 85
3. The European Monetary System:
A Regional Bretton Woods or an
Institutional Innovation? ~anfred Wegner 89
Comments Roland Vaubel 119
II. INTERNATIONAL FINANCIAL MARKETS 123
4. Domestic Bank Regulation in a World
of International Bankinll Kenneth E. Scott 125
Comments Karl Kreuzer 150
s.
The Internationalization of Financial
Markets and the Regulatory Response David Folkerts-Landau 175
Comments Nikolaus K. A. LAufer 210
VIII
Page
6. Economic Analysis of Debt-Equity
Swaps GUnter Franke 213
Comments Silvio Borner 234
7. Competitive Performance, Regulation
and Trade in Banking Services Anthony Saunders/
Ingo Walter 238
Comments Bernd Genser 251
III. PROTECTIONISM AND THE URUGUAY GATT ROUND 255
8. Does The World Need a GATT for
Services? Herbert G. Grubel 257
Comments Helmut Hesse 276
9. Policy Motives and International
Trade Restrictions Arye L. Hillman 284
Comments Thomas D. Willett 303
10. Protectionist Rules and Internationalist
Discretion in the Making of National
Trade Policy J. Michael Finger 310
Comments Gary C. Hufbauer 324
IV. INSTITUTIONAL ARRANGEMENTS FOR
INTERNATIONAL PRODUCTION 331
11. Institutional Arrangements for Natural
Resources Horst Siebert 333
Summary of the Discussion Jonathan P. Thomas 366
12. Property Rights in Information and
the Multinational Firm: The Case of
Technical Learning in a Multiplant
System Eirik G. Furubotn 368
Comments Heinz Hauser 401
IX
Page
13. New Institutional Arrangements in
International Economic Law:
The Working of Codes of Conduct Christian Kirchner 409
Comments William A. Niskanen 436
14. Competing Institutional Arrangements
and Internationalization Carsten Th. Ebenroth 438
Participants 479
Introduction
New Institutional Arrangements for the World Economy
Hans-Jiirgen Vosgerau, Konstanz
I. The Problem
During the first days of July 1987 the newly established Sonderforschungs
bereich 178 "Internationalisierung der Wirtschaft" held its first symposium in
Konstanz/Bodensee. "New Institutional Arrangements for the World Economy" were
discussed by a group of economists and lawyers working in the fields of interna
tional trade, international monetary economics, international finance, international
public choice, and international economic law. Cooperation between these areas of
research is an important condition for attaining the long-term aim of the
Sonderforschungsbereich, viz. analysis of the complex interdependencies between
international economic transactions of various kinds and international economy
related institutions in a broad sense. The nature of these interdependencies seems to
be crucial for the world economy's further development. A better understanding of
their characteristics will be helpful for the solution of most imminent international
economic problems.
Four problem areas were especially addressed during the conference, each con
sisting of three or four contributions. The revised papers are presented in this
volume, each followed by a comment of the invited discussant, or by a summary of
the discussion. The last contribution is meant as a summary conclusion and has no
comment.
The four problem areas discussed were: (1) Exchange rate stabilization and econ
omic policy coordination, (2) International financial markets and their regulation,
(3) Protectionism and the Uruguay GAIT-round, and (4) The institutional frame
work for international production.
Studies in International Econanics and Institutions
Vosgerau (&I.) New Institutional Arrangements for the Ibrld Ec:oncmy
© Springer-Verlag Berlin Heidelberg 1989
2
II. AD Overview of the Papers
(1) Exchanae Rate Stabilization and Economic Policy Coordination
In the introductory paper Thomas Willett pleads for national reforms with the aim
of adapting macroeconomic policies better to the needs of international
stabilization. Sebastian Edwards presents an empirically founded analysis of the
effect of floating exchange rates on the economic development of third world
countries which he classifies as essentially negative. Manfred Wegner finally
investigates reasons for the success - not anticipated by many observers - of the
European Monetary System, which under the dominant influence of the Deutsche
Bundesbank brought about a high degree of currency stability in Europe.
(2) International Financial Markets and their Reaulation
National regulations still play an important rOle for financial markets. Kenneth
Scott reports on the American system of bank regulations, a report which is ex
tended to other countries by Karl Kreuzer in his comment. Recent financial inno
vations, which are analyzed by David Folkerts-Landau, are largely reactions to
such regulations; their effects in various countries therefore differ depending on
the national framework. One example of those innovations are debt-equity swaps
conceived as a vehicle to transform problematic bank credits into direct invest
ments mainly in South-American countries: Giinter Franke presents a highly critical
analysis of this subject. Finally, international financial services are related to bank
regulations by Anthony Saunders and Ingo Walter.
(3) Protectionism and the New GATT-Round
International transactions of services play an important rOle in the Uruguay round.
Herbert Grubel addresses the subject and denies the need for a new international
institution, a GATT for services. His arguments are first, that services do not
fundamentally differ from commodities and second, that the existing GAIT
3
mechanism is not suitable for efficient liberalization. Very critical comments on the
real efficiency of present GAIT rules were also offered by Arye Hillman and
Michael Finger. Following the initial success of several tariff reductions, GAIT
since a decade or so increasingly suffers from the influence of pressure groups.
Both authors demonstrate for the US how import-competing industries, by using
legal possibilities, are able to avoid the need to adjust.
(4) The Institutional Framework for International Production
The organization of production involving several countries has undergone important
changes during the last two decades in many sectors. Horst Siebert analyzes for the
extraction of natural resources the transition from highly hierarchical organizations
to complex systems of contracts binding together a variety of otherwise indepen
dent actors. Multinational enterprises on the other hand can gainfully exploit learn
ing effects associated with production in various plants, if they efficiently co
ordinate those effects between their plant locations: this is demonstrated and ana
lyzed by Eirik Furubotn. - International rules for the behaviour of international
business are only timidly emerging and are still very weak. Nevertheless, Christian
Kirchner argues that the "Restrictive Business Practices Code", an example of inter
national soft law, has some effects on the behaviour of international actors in the
field. - The volume is concluded by Carsten-Thomas Ebenroth's analysis of the
tensions between competing national jurisdictions and the processes of internation
alization. Differences between national laws can be exploited by internationally
active agents, forcing legislators to react, to adapt or to contemplate "New Institu
tional Arrangements for the World Economy".
III. Some Highlights of the Discussion
Every paper was followed by a lively discussion, which was introduced by an
invited comment. Some arguments came up repeatedly, which suggests that they
touched fundamental problems. Only these recurrent themes shall be briefly re
ported.