Economic policy diffusion and the international financial system: the case for an international Keynesian coalition

Abstract This article illustrates how the international financial markets influence socio-economic policy decisions taken by emerging market economies. These markets determine the value of an emerging market economy's currency and have brought about increasing currency volatility. In order to bring some form of regulation to these markets to reduce volatility, an international coalition is essential as these are global markets operating on a global scale. This article suggests that a coalition of emerging market economies may not be sufficient to bring about such regulation as some of these economies (particularly India and China) are beneficiaries of the new financial regime. If countries such as Brazil and South Africa are seeking an international coalition for regulation, then the social democratic movements of Western Europe may be more appropriate coalition partners than the regimes of India and China.