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The Regulator’s Dilemma: Hedge Funds in the International Financial Architecture

In: New Development Strategies

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  • Barry Eichengreen

Abstract

Hedge funds have been the subject of considerable recent commentary, much of it not entirely favorable. Malaysia’s Mahathir bin Mohamad famously accused them of precipitating the Asian currency and financial crisis. Joseph Yam of the Hong Kong Monetary Authority accused them of coordinating short sales on the Hong Kong Exchange with short sales of the Hong Kong dollar (the so-called ‘double whammy’ or ‘double play’). And the Reserve Bank of Australia has accused them of manipulating the market in the Australian dollar by coordinating their position taking and signalling that they were about to attack the currency. Hedge funds had substantial positions in Russian GKDs in the summer of 1998 and suffered large losses from Russia’s default; in the rush to cover their positions and restore their liquidity, they may have played a major role in last autumn’s credit crunch. And then there was the all-but-failure of Long-Term Capital Management (LTCM) and the threat this may have posed to the stability of the global financial system.

Suggested Citation

  • Barry Eichengreen, 2004. "The Regulator’s Dilemma: Hedge Funds in the International Financial Architecture," Palgrave Macmillan Books, in: Akira Kohsaka (ed.), New Development Strategies, chapter 10, pages 201-228, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-52360-9_10
    DOI: 10.1057/9780230523609_10
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    Cited by:

    1. Chambers, David & Esteves, Rui, 2014. "The first global emerging markets investor: Foreign & Colonial Investment Trust 1880–1913," Explorations in Economic History, Elsevier, vol. 52(C), pages 1-21.

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