The Volatility Machine
The Volatility Machine presents a radically different argument for what has caused, and likely will continue to cause, the collapse of emerging market economies. It 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. 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.
"Michael Pettis brilliantly demystifies the complexities of global finance, banking, and capital markets crisis. Volatility in markets may never be our friend, but how to live with it and manage the uncertainty and risks to global economic security requires a careful reading of this pathbreaking book."
— Glenn Yago, Director, Milken Institute
"The Volatility Machine makes refreshing use of the role of corporate finance theory in examining a country's capital structure and assessing its financial vulnerability."
— Roger Ibbotson, Professor in the Practice of Finance, Yale University, and Chairman, Ibbotson Associates, Inc.
"This valuable book leads us away from the stale debate on the international financial architecture with a simple and powerful message: proper management of a country's external balance sheet is the key to avoiding financial distress. This is a book that be ongs on the bedside table of every financial minister."
— Dani Rodrik, Professor of International Political Economy, John F. Kennedy School of Government, Harvard University
"Finally, here is a readable book that explores thoroughly the proposition that EM sovereigns default on their external debt, not because they are dissolute, but as often as not because they are vulnerable to adverse shocks emitted by the rich countries. Michael Pettis's pathbreaking ideas should undoubtedly attract the attention of finance and treasury ministers and their economic advisors as well as all students of development economics."
— Michael Adler, Professor of International Finance Graduate School of Business, Columbia University