Implications of the Global Financial Crisis for Financial Reform and Regulation in Asia. Edited by Masahiro Kawai, David G. Mayes and Peter J. Morgan.CheltenhamandNorthampton:EdwardElgarPublishingandAsianDevelopmentBankInstitute,2012.Pp.296.
The 2008 crisis demonstrated the fragility offinancial markets and the systemic effects that individual banks can have on both financial systems and the real economy. The edited bookImplications of the Global Financial Crisis for Financial Reform and Regulation in Asia, jointlypublished by the Asian Development BankInstitute and Edward Elgar Publishing, offers atimely and thorough analysis of what the 2008crisis has meant for Asian markets. As such, it fills agapintheliteraturewhich,todate,hasprimarilyexaminedtheeffectsofthecrisisontheeconomiesofdevelopedcountriesintheWest.
According to the authors, the book’s centralpurpose is to identify the challenges imposed bythe 2008 global financial crisis and suggest policy reforms. Within this context, the book examinesthe evolving regulatory framework for globalfinance and capital markets. The overarching conclusion is neatly summarized in a quote fromChapter 2, which states that “the Westphalianprincipalsofsovereigntythatgoverninternationalfinancial oversight are not suited to the realities of an interconnected financial system”.
Throughout the book, numerous examplesare offered of the disconnect between financial regulation,whichistypicallynationalorregional,and finance, which is global. Based on these observations,thebookoffersrecommendationsfor
how financial systems can improve international cooperation through establishing macroprudentialregulation, coordinating risk analysis, andincreasinginformationsharing—whichthebookargues is a prerequisite for understanding andmonitoringsystemicrisk.
While the claim that international cooperationin finance needs improvement is not particularly innovative, the book adds value to the debate infourways.First,whiletheargumentsandanalysisare technical, each chapter is well written andclearly presented. Moreover, the chapters arecomplimentary,meaningthatalthougheachsectioncan be read in isolation, the whole book offers arounded assessment of the challenges states facewhen trying to balance economic growth withfinancial stability. The rounded assessment is dueinparttothefactthattheauthorscomefromdiverseinstitutionsfromaroundtheworld,aswellasthestructureofthebook,whichisdividedintofoursections.
Sections I and II examine how Asiangovernments and regulators can strengthenfinancial surveillance and monitoring. Section III examinestheroleofthestateincrisismanagementand resolution. The rationale for addressing bothcrisis prevention and resolution comes from thebook’s assertion that while improvements can bemade to reduce the likelihood of financial crises, risk cannot be fully eliminated. Because of this,crisis resolution procedures must be developedandwellunderstood.Withthegoalsofpreventionand containment, Section IV looks to the future,examining the pros and cons of Asia’s rapidlydevelopingbondmarkets,animportantissuegiventhe importance that sovereign and corporate debtplayineconomicgrowth.
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Text Box
Reproduced from Journal of Southeast Asian Economies Vol. 30, no. 3 (Singapore: Institute of Southeast Asian Studies, 2013). This version was obtained electronically direct from the publisher on condition that copyright is not infringed. No part of this publication may be reproduced without the prior permission of the Institute of Southeast Asian Studies. Individual articles are available at < http://bookshop.iseas.edu.sg >
Journa l o f Southeas t As ian Economies 335 Vo l . 30 , No . 3 , December 2013
Second, in addition to the clarity and depth ofanalysis, the book offers innovative guidelinesfor regulating financial institutions in Asia and elsewhere.Forexample,Chapter5offersdetailedrecommendations for how Asian markets shoulddevelop securitized products, such that assetclasses can benefit from diversification, while limiting exposure to systemic risk. Similarly,Chapter7offersrecommendationsforovercomingthe hurdles facing financial integration in Asia in thewakeofthecrisis.TheserecommendationsaredrawninpartfromtheexperiencesinEuropeandelsewhere.
The third benefit of the book is that its empirical chaptersarecomplimentedbyastrongelementoftheory.Authors engage in the debates on issuessurrounding moral hazard, the procyclicality offinancial systems, the benefits/costs of capital flow liberalization, and whether the benefits of growth from financial innovation outweigh the increases in systemic risk. The theoreticaldebates augment the empirical analysis, whichinclude quantitative examinations and casestudies of financial systems in different regions of the world. The mix of theory and empiricalresearch offers a robust engagement with thebook’scentralresearchquestion.
Fourth,asstatedin the introductoryparagraphabove, the book fills a gap in a large body of literaturethat, todate,hasfocusedontheeffectsof the financial crisis on Western, developed economies.Thebookexplainsthatthe2008crisisoffers lessons for Asian financial development, which should complement the lessons drawnfrom the Asian financial crisis of the 1990s. While the crisis of the 1990s required measuresto manage the domestic collapse of financial systems, the 2008 crisis has been more aboutmanaging the externalities from collapsingmarketsintheWest,andobservingbestpracticesfor financial regulation and crisis management. Explaining thesuccessesandfailuresofWesternfinancial management, and how these apply to Asia’s financial development, is perhaps the most importantcontributionofthebook.
Whilethebookisverywellpresentedandoffersmany benefits, one area that may cause confusion
for readers is that there does not appear to be aconsistent definition of what constitutes “the Asian region”. Most of the chapters focus on the major Southeast Asian economies, but some chaptersinclude analysis of Korea, Taiwan, and Japan.Furthermore, the elephant in the room, China, isonly sparselymentioned, despite the fact that thebook makes important references to initiatives inwhichChinaplaysaleadrole,liketheChangMaiInitiative Multilateralisation and the Asian BondMarketsInitiative.
Given Asia’s size and diversity, it isunderstandable and appropriate for the book tofocus exclusively on certain regions. Offeringa methodology for why certain countries werechosen or omitted, however, may have made thebook’spreciseregionofstudyclearerforreaders.
Despitethis,asstated,thebookaddstremendousvalue to the current literature on global financial reform.Itshouldbereadbystudentsandacademicsinvolved in global finance, but also by policy-makers tasked with developing the regulatoryframework for Asia’s financial system.
ChrISTOPhErNAPOlIUniversity of Nottingham
DOI:10.1355/ae30-3i
Law and Development in Asia. Edited by Gerald Paul McAlinn and Caslav Pejovic. london:routledge,2012.Pp.328.
Ifthelawanddevelopmentmovementwerehuman,it would have spent its life on the psychiatrist’scouch.Fewacademicendeavoursareriddledwithas much self-doubt. Despite renewed academicinterestafterTrubekandGalanter’s1974obituary,the discipline has struggled to establish itsidentity. Trubek, in the Introduction to Law and Development in Asia, declares that “the hoped-for academic field of law and development never materialized” (Trubek and Galanter 1974, p. 2). In his view, the subject generates significant interest withinthecontextofrelateddisciplines,butcannotstand independently. For a field that may not exist,
