This chapter describes the IMF and the World Bank, the two big international financial institutions created after World War II to stabilize the global economy. The two have similar goals and mechanisms but work with different instruments and in different contexts. Both pool the resources of their members and use the money it raises to make loans to governments with specific needs. The IMF lends to countries experiencing critical balance-of-payments problems. It makes short-term loans of foreign currencies that the borrowing country must use to finance the stabilization of its own currency or monetary system. As a precondition to the loan, the Fund generally requires that the borrower change its policies in ways that the Fund believes will enable monetary stability in future. The World Bank makes longer-term loans to pay for specific projects related to development or poverty reduction. Most Bank loans are tied to a particular project undertaken by the borrowing government. The Bank and the Fund are twinned institutions in the sense that they share a common origin and many structural features, but their practices and purposes are very different. As a result, they contrast each other in ways that are useful for exploring the mix of law and politics in global affairs.

This chapter argues that it is important to get the numbers right, to know the sources of information on international trade- and financial flows and multinational activity, And to familiarise yourself with the basics of accounting identities as this may lead you to avoid common pitfalls. We discuss the relationships between the current account and the capital and financial account of the balance of payments, as well as the information this provides on multinational activity. We review the funding options for multinational activity and provide information on the developments of the main financial flows in the world. We conclude that there is a pattern in the development of international capital mobility, which was already high at the end of the nineteenth and beginning of the twentieth century, then declined substantially in the interbellum to rise again from approximately 1980 onwards.

Chapter 2 introduces a framework for how to think about war reparations. It discusses how a reparation transfer can be smoothed out over time by borrowing the money. I then discuss other ways a transfer can be paid, by taxes or printing money, and the effects this has on the balance of payments and the terms of trade. Finally, in a technical section, I show how changed terms of trade affect the current account and national income.

We divide this chapter into four sections. The first section outlines the taxonomy of commodity-based monetary regimes in Europe and their advantages and costs. The second section describes the main international monetary flows in the early modern period and relates them to East-West balance-of-trade adjustments and monetary systems in Asia (1700–1800). In the third section, we turn to the development of the foreign exchange market, which was mostly based on bills of exchange in this period. We explain the expansion of the bills-of-exchange market from the European to the intercontinental network in the mid-nineteenth century. The final section then investigates how nominal exchange rates and relative prices contributed to the global current account adjustments in the near pre-gold standard period (1820s–1870s).

This chapter argues that international monetary stability is an underprovided global public good under the current design of the International Monetary System. It proposes to apply the emerging doctrine of Common Concern of Humankind (Common Concern) as a methodological approach. This chapter starts by exploring the concept of monetary stability at the different levels of governance. It is followed by a description of the doctrine of Common Concern. It continues with an analysis of the three-dimensional approach proposed by this doctrine starting with the duty to cooperate in monetary affairs both from a top-down approach (international level of governance) and a bottom-up approach (central banking cooperation). The chapter continues by examining domestic obligations concerning monetary stability with an emphasis on the special role of the central banks and also by examining some cases of unilateral actions and issues of extraterritoriality in the pursuit of monetary stability. Lastly, it offers some remarks on the most controversial aspect of the doctrine that relates to securing compliance with the obligations that may emerge from an accepted Common Concern of international monetary stability.

Israel’s balance of payments changed dramatically between 1995 and 2015. These years mark a period of transition from deficits to surpluses in the current account. Among the factors behind this reversal were a sound macroeconomic policy, the global boom in high-tech industries, and the discovery of natural gas on Israel’s coast in the Mediterranean Sea. The transition reflects an increase in the national saving rate and a decline in the rate of national investment. While these important changes were taking place, the financial account of the balance of payments also shifted due to various structural changes, such as the completion of foreign exchange market liberalization and a shift to a floating exchange rate regime. Owing to the foregoing developments, Israel has become a net lender to the rest of the world. In this chapter we analyze and quantify these major changes and assess the extent to which the existence of current account surpluses be considered as a sustainable phenomenon.

This chapter provides an introduction to economic crises. It describes a number of different types of crises and defines both contagion and systemic risk. It analyzes balance of payments and currency crises, the Asian crisis, and the global financial crisis. It takes up the potential roles of prudential regulation and currency controls in helping to prevent crises.

This chapter provides an introduction to macroeconomic accounting in international economics, including open-economy accounts and balance of payments accounts. It considers the analysis of the balance of payments and global imbalances. Appendices describe social accounting matrices, a simple Keynesian open-economy model, and the difference between gross domestic product and gross national income.

Each Contracting Party shall guarantee that all payments relating to an investment by an investor of the other Contracting Party may be freely transferred into and out of its territory without delay.

McNamara’s appreciation of the military problems in Vietnam was intimately connected to economic developments in Washington. A continued balance of payments deficit and an unsettled domestic economic picture heightened the administration’s sense of vulnerability. The Senate Foreign Relations Committee (SFRC) exerted new pressure on the Military Assistance Program (MAP) that funded operations in Vietnam. With Dillon, McNamara worked on a Cabinet Committee on the Balance of Payments that recommended significant troop redeployments around the world. The JCS and State Department stymied their efforts. In this context, McNamara met with the famed economist John Kenneth Galbraith, who was especially critical of the growing commitment in Vietnam. McNamara chose a counterinsurgency strategy in Vietnam because it was cheaper as it relied on local forces. As Galbraith and others recommended, McNamara moved to downgrade the relative importance of South Vietnam to US security and to emphasize that the conflict was an internal insurgency. He used the pressures on the MAP to accelerate the phaseout of the US presence in South Vietnam.