The Volatility Machine: Emerging Economics and the Threat of Financial Collapse (Hardcover)

by Michael Pettis (Author) "This section, which consists of two chapters, describes the recent financial crises of 1994-99, and lists their major characteristics..." (more)
Key Phrases: national capital structure, capital structure framework, credit asymmetry, United States, Latin American, South Korea (more...)

Editorial Reviews

Review
"A welcome departure from the sterile academic debate on the subject of financial crises." -- Institutional Investor, June 2001

Product Description
This book presents a radically different argument for what has caused, and likely will continue to cause, the collapse of emerging market economies. Pettis combines the insights of economic history, economic theory, and finance theory into a comprehensive model for understanding sovereign liability management and the causes of financial crises. He examines recent financial crises in emerging market countries along with the history of international lending since the 1820s to argue that the process of international lending is driven primarily by external events and not by local politics and/or economic policies. He draws out the corporate finance implications of this approach to argue that most of the current analyses of trecent financial crises suffered by Latin America, Asia, and Russia have largely missed the point. He then develops a sovereign finance model, analogous to corporate finance, to understand the capital structure needs of emerging market countries. Using this model, he finally puts into perspective the recent crises, a new sovereign liability management theory, the implications of the model for sovereign debt restructurings, and the new financial architecture. Bridging the gap between finance specialists and traders, on the one hand, and economists and policy-makers on the other, The Volatility Machine is critical reading for anyone interested in where the international economy is going over the next several years.

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Product Details

• Hardcover: 272 pages
• Publisher: Oxford University Press, USA (May 17, 2001)
• Language: English
• ISBN-10: 0195143302
• ISBN-13: 978-0195143300
• Product Dimensions: 9.6 x 6.4 x 0.9 inches
• Shipping Weight: 1.1 pounds (View shipping rates and policies)
• Average Customer Review: 4.8 out of 5 stars See all reviews (6 customer reviews)
• Amazon.com Sales Rank: #555,637 in Books (See Bestsellers in Books)

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Customer Reviews

Most Helpful Customer Reviews

4 of 6 people found the following review helpful:

5.0 out of 5 stars A refreshing view, July 5, 2001

By	Khaled Bassily (New York, NY United States) - See all my reviews

Michael Pettis has succeeded in mystifying the collapse of EM economies. His approach is new and indeed very methodical. I found the book intellectually challenging and have learned quite a lot reading it. I highly recommend it for those who want to understand how LDC economies rise and fall. Having a background in corpporate finance is crucial to enjoying the book though.

4 of 6 people found the following review helpful:

5.0 out of 5 stars Understand What's Happening In Emerging Markets, May 4, 2001

By A Customer

This is a MUST READ for institutional investors worldwide! For the first time I have a confident sense of what is at the core of emerging market instability. Now if only some government policy makers would read this (even they would understand it!), the causal conditions might start to improve.

3 of 5 people found the following review helpful:

5.0 out of 5 stars A breakthrough in economic theory, February 13, 2001

By	"bobster_lee" (New York, NY United States) - See all my reviews

This book completely transformed the way I think about sovereign financial crises. Michael Pettis creates a simple yet elegant framework by which to think of sovereign crises, the fundametal problems which precede them and potential solutions. This book should be every finance minister's primary reference tool for the development of sovereign capital structure.