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THE POLITICAL ECONOMY OF POLICY CREDIBILITY: THE NEW-CLASSICAL MACROECONOMICS AND THE REMAKING OF EMERGING ECONOMIES Ilene Grabel Working Paper #269 – June, 1999 Ilene Grabel, former Kellogg Institute Visiting Fellow (fall 1998), is Associate Professor of International Finance of the Graduate School of International Studies and Codirector of the Global Finance, Trade and Economic Integration graduate program at the University of Denver. Professor Grabel has also served in the UN Expert Group on Financial Crises in Emerging Democracies and the US Information Service Economic Speakers’ Program at the Universidad Nacional Autónoma de México (UNAM), as a Postdoctoral Fellow at the Center for Advanced Study in the Behavioral Sciences at Stanford University, and as a policy research and design consultant for the Financial Democracy Campaign. Among her most recent publications are “Coercing Credibility: Neoliberal Policies and Monetary Institutions in Developing and Transitional Economies” in Political Economy of Central Banking (P. Arestis and M. Sawyer, eds., 1998); “Speculation” in the Encyclopedia of Political Economy (P. O’Hara, ed., 1998); and “Savings, Investment and Functional Efficiency: A Comparative Examination of National Financial Complexes” in The Macrocosms of Finance, Saving, and Investment (R. Polin, ed., 1997). The Kellogg Institute provided invaluable support for undertaking revisions on this paper. An earlier version was presented at the Faculty of Economics and Politics, Cambridge