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572. Mispricing of Sovereign Risk and Multiple Equilibria in the Eurozone
- Author:
- Paul De Grauwe and Yuemei Ji
- Publication Date:
- 01-2012
- Content Type:
- Working Paper
- Institution:
- Centre for European Policy Studies (CEPS)
- Abstract:
- This paper finds evidence that a significant part of the surge in the spreads of the PIGS countries (Portugal, Ireland, Greece and Spain) in the eurozone during 2010-11 was disconnected from underlying increases in the debt-to-GDP ratios, and was the result of negative market sentiments that became very strong since the end of 2010.
- Topic:
- Economics, Monetary Policy, and Financial Crisis
- Political Geography:
- Europe, Greece, Spain, Portugal, and Ireland
573. Eschewing Choice: Ukraine's Strategy on Russia and the EU
- Author:
- Elena Gnedina and Evghenia Sleptsova
- Publication Date:
- 01-2012
- Content Type:
- Working Paper
- Institution:
- Centre for European Policy Studies (CEPS)
- Abstract:
- Ukraine has long been castigated for its noncommittal attitude to cooperation with the EU, this being part of its 'multi-vector' foreign policy. Such a policy was widely attributed to the failings of domestic elites, which delay reform for fear of losing rents and power. This CEPS Working Document suggests, however, that the recent setback in EU-Ukraine relations highlights more complex reasons behind this. First, it asserts that a pro-European vector is not a self-evident choice for Ukraine, which is economically interdependent with both Russia and the EU. Second, it finds that the economic crisis has made the EU less attractive in the short term. In good times business was looking to Europe for opportunities to develop. But in times of crisis, it is looking to Russia for cheap resources to survive. Despite these unfavourable short-term trends, the authors conclude that an association agreement with the EU stands out as the only alternative that promises to put the shaky Ukrainian economy back on track towards long-term sustainable economic growth.
- Topic:
- Economics, International Trade and Finance, and Markets
- Political Geography:
- Russia, Europe, and Ukraine
574. How Verbal Threats to Close Oil Transit Chokepoints Lead to Military Conflict
- Author:
- John Bowlus
- Publication Date:
- 01-2012
- Content Type:
- Policy Brief
- Institution:
- Global Political Trends Center (GPoT)
- Abstract:
- On December 26, 2011, in response to US, European, and potential Asian sanctions on Iranian oil exports, the government in Tehran issued a threat to “cut off the Strait of Hormuz.” The US Defense Department responded that any blockade of the strait would be met with force. On first read, it is easy to dismiss such saber rattling as another chapter in the new Cold War in the Middle East between Iran and its allies – including Syria, Hamas, and Hezbollah – and the US, Israel, and the Sunni Gulf States, mostly notably Saudi Arabia. Iran has since backed away from its threat, but the event still carries importance because it is unclear how both the US and Iran will continue to respond, particularly as the diplomatic and economic pressures grow more acute while Iran's controversial nuclear program advances. Could such a verbal threat by Iran to cut off the Strait of Hormuzignite a military conflagration in the region? The relationship between military conflict and oil supply disruptions is well established; however, policymakers and analysts tend to focus on the incidents in which military conflict causes disruptions in oil supplies and sharp increases in prices. The first and most obvious example of this dynamic was the Arab-Israeli War of 1973. The subsequent oil embargo by the Arab members of the Organization for Petroleum Exporting Countries (OPEC) against the United States and the Netherlands for their support of Israel caused prices to soar as oil-consuming nations endured supply shortages. The Iranian Revolution from 1978 to 1979 was another event that curtailed Western nations' access to oil and caused prices to spike. When thinking about the relationship between military conflict and oil supply disruptions, however, policymakers and analysts should also recognize that the competition over oil – and even verbal threats to disrupt oil supplies by closing oil transit chokepoints – have either led directly to military conflict or have provided a useful cover under which countries have initiated military conflict. By examining past episodes when countries issued threats to close oil transit chokepoints, this Policy Brief helps illuminate the dangers associated with the current crisis over the Strait of Hormuz.
- Topic:
- Foreign Policy, Diplomacy, Economics, and Sanctions
- Political Geography:
- United States, Europe, Middle East, Asia, and Arabia
575. The (lack of) women arbitrators in investment treaty arbitration
- Author:
- Gus Van Harten
- Publication Date:
- 02-2012
- Content Type:
- Policy Brief
- Institution:
- Columbia Center on Sustainable Investment
- Abstract:
- Investment arbitration has a remarkably poor record on representation of women. This calls for reform of the appointments process for arbitrators, who make important policy choices in the context of global governance.
- Topic:
- Economics, Gender Issues, International Trade and Finance, and Foreign Direct Investment
- Political Geography:
- Europe
576. The Underachiever: Ukraine's Economy Since 1991
- Author:
- Pekka Sutela
- Publication Date:
- 03-2012
- Content Type:
- Working Paper
- Institution:
- Carnegie Endowment for International Peace
- Abstract:
- When Ukraine became independent in 1991, there were expectations that it would in the near future become a wealthy free market democracy and a full member of the European and Euro-Atlantic communities. The largest country geographically wholly European, and the fifth-biggest European nation by size of population, it was hoped, would become a member of the European Union (EU), the North Atlantic Treaty Organization (NATO), and the Organization for Economic Cooperation and Development (OECD).
- Topic:
- Corruption, Economics, Emerging Markets, International Trade and Finance, and Governance
- Political Geography:
- Europe, Ukraine, and Atlantic Ocean
577. Latvia's Economic Recovery: Lessons to Learn?
- Author:
- Steve Lutes
- Publication Date:
- 03-2012
- Content Type:
- Journal Article
- Journal:
- The Diplomatic Courier
- Abstract:
- While the impact of the 2008 global economic crisis has been varied across nations, it is unmistakable that Latvia was among those hardest hit with unemployment topping 20 percent and a considerable contraction in gross domestic product (GDP) from 2008 to 2010. But the tide has ostensibly turned with the country completing the International Monetary Fund's (IMF) stabilization program in December 2011, and the government projecting growth of approximately 5 percent for 2011. So how did Latvia accomplish this turn around as others in Europe remain mired in economic turmoil?
- Topic:
- Economics and International Monetary Fund
- Political Geography:
- Europe
578. Credit at Times of Stress: Latin American Lessons from the Global Financial Crisis
- Author:
- Liliana Rojas-Suarez and Carlos Montoro
- Publication Date:
- 02-2012
- Content Type:
- Working Paper
- Institution:
- Center for Global Development (CGD)
- Abstract:
- The financial systems in emerging market economies during the 2008–09 global financial crisis performed much better than in previous crisis episodes, albeit with significant differences across regions. For example, real credit growth in Asia and Latin America was less affected than in Central and Eastern Europe. This paper identifies the factors at both the country and the bank levels that contributed to the behavior of real credit growth in Latin America during the global financial crisis. The resilience of real credit during the crisis was highly related to policies, measures and reforms implemented in the pre-crisis period. In particular, we find that the best explanatory variables were those that gauged the economy's capacity to withstand an external financial shock. Key were balance sheet measures such as the economy's overall currency mismatches and external debt ratios (measuring either total debt or short-term debt). The quality of pre-crisis credit growth mattered as much as its rate of expansion. Credit expansions that preserved healthy balance sheet measures (the “quality” dimension) proved to be more sustainable. Variables signalling the capacity to set countercyclical monetary and fiscal policies during the crisis were also important determinants. Moreover, financial soundness characteristics of Latin American banks, such as capitalization, liquidity and bank efficiency, also played a role in explaining the dynamics of real credit during the crisis. We also found that foreign banks and banks which had expanded credit growth more before the crisis were also those that cut credit most. The methodology used in this paper includes the construction of indicators of resilience of real credit growth to adverse external shocks in a large number of emerging markets, not just in Latin America. As additional data become available, these indicators could be part of a set of analytical tools to assess how emerging market economies are preparing themselves to cope with the adverse effects of global financial turbulence on real credit growth.
- Topic:
- Debt, Economics, Emerging Markets, Globalization, and Financial Crisis
- Political Geography:
- Europe, Asia, and Latin America
579. Fighting climate change: A structural shift towards renewable energies requires concerted policy action
- Author:
- Patrick Matschoss
- Publication Date:
- 03-2012
- Content Type:
- Policy Brief
- Institution:
- Finnish Institute of International Affairs (FIIA)
- Abstract:
- Renewable energies will be the major contributor to any future low carbon energy system and the share may be as high as nearly 80% of the world's energy supply by 2050. Renewable energies have vast potential but require a set of coherent policies to reach necessary deployment rates, because the market place neither accounts sufficiently for their climate change-related and wider benefits nor for the benefits of technological learning, making them appear less competitive than they really are. Renewable energies can be integrated in all supply systems and end-use sectors but at some point they will require investment and change. In electricity, an enhanced Pan-European network infrastructure (smart grid) would smooth variability and the remaining non-renewable generation capacity would be highly flexible. Energy security would be enhanced by greater efficiency and a broader and less import-dependent energy portfolio with less vulnerability to energy price volatility. Network stability needs to be addressed but some renewable energies are fully dispatchable and part of the solution. The transition to renewable energies is possible and beneficial, not only due to climate change but also because it serves energy security concerns and necessary infrastructure improvements. The EU's proposed long-term strategy concerning emission reductions and competitiveness, as well as the related legislation, is moving in the right direction and it is up to the member states to pick this up and push it forward.
- Topic:
- Climate Change, Economics, Energy Policy, and Treaties and Agreements
- Political Geography:
- Europe
580. Interest Rate Shock and Sustainability of Italy's Sovereign Debt
- Author:
- William R. Cline
- Publication Date:
- 02-2012
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics (PIIE)
- Abstract:
- Contagion from Greece, together with domestic political uncertainty in Italy, caused interest rates on Italian sovereign debt to spike in the second half of 2011. As shown in figure 1, the risk spread above German bunds for 10-year Italian government bonds rose from 200 basis points in early July 2011, to a range of 300 to 400 basis points after the July 21 Greek package with its new emphasis on private sector involvement. There was a second surge to the 400 to 500 basis point range in November through January, following the October 27 Greek package that insisted on a 50 percent reduction in private sector claims.
- Topic:
- Debt, Economics, and Financial Crisis
- Political Geography:
- Europe, Germany, and Italy