Political Geography: Global Focus / Topic: Credit

Author:: Òscar Jordà, Martin Kornejew, Moritz Schularick, and Alan M. Taylor
Publication Date:: 10-2021
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: What are the macroeconomic consequences of business credit booms? Are they as dangerous as household credit booms? If not, why not? We answer these questions by collecting data on non-financial business liabilities (primarily bank loans and corporate bonds) for 17 advanced economies over the past 150 years. Unlike household credit, business credit booms are rarely followed by macroeconomic hangovers. Data on debt renegotiation costs—instrumented by a country’s legal tradition—show that frictions to debt resolution make recessions deeper and longer—an important factor in explaining the differences with household credit booms.
Topic:: Debt, Economics, International Political Economy, Global Recession, Macroeconomics, Credit, and Corporations
Political Geography:: Global Focus

Author:: Naoyuki Yoshino and Farhad Taghizadeh-Hesary
Publication Date:: 08-2019
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: Lack of long-term financing, the existence of various risks, the low rate of return, and lack of capacity in market actors are major challenges for the development of low-carbon projects. This paper attempts to provide guidelines for governments and financial institutions by highlighting practical solutions as enabling conditions of low-carbon finance and investment. Such solutions include increasing the role of public financial institutions, increasing the share of non-banking financial institutions in long-term investments, using the spillover tax to increase the rate of return, developing green credit guarantee schemes to reduce the credit risk, and addressing low-carbon investment risks via financial and policy de-risking. These solutions are analysed in detail and considerations for their implementation are discussed throughout the paper. Tools and instruments for low-carbon investments and a practical example of the implementation of the proposed tools are also provided in this paper
Topic:: Climate Change, Infrastructure, Banks, Credit, and Financial Institutions
Political Geography:: Global Focus

Author:: Paulo dos Santos
Publication Date:: 08-2013
Content Type:: Working Paper
Institution:: School of Oriental and African Studies - University of London
Abstract:: This note considers the relationship between credit allocation and the aggregate, class distribution of income in the Circuit of Capital. Production and consumption credit inject means of purchase in different locations in the monetary circuits of capitalist reproduction. On the basis of comparative-dynamic analysis of the properties of steady-state evolutions, the note shows that production credit increases the wage share in total income, while consumption credit increases profit shares. These findings hold in general for any evolution in which sectoral revenue- elasticities of outlays measure less than unity. The note also motivates a new endogenous approach to the aggregate distribution of income, and offers new analytical tools facilitating work based on demand-constrained models of the Circuit of Capital.
Topic:: Inequality, Income Inequality, Economic Theory, Credit, and Capital
Political Geography:: Global Focus

Author:: Jan Toporowski
Publication Date:: 03-2012
Content Type:: Working Paper
Institution:: School of Oriental and African Studies - University of London
Abstract:: The paper addresses the issue of how debt deflation may arise in a capitalist economy with a sophisticated credit system. It argues that the standard argument of debt deflationists, that debt-financed investment causes a build-up of unsustainable investment, fails to recognise that debt is back by credit. A corollary of this is that the rate of interest is not a factor in investment decisions. Financial fragility is caused by heterogeneity of balance sheets, debt financed operations in financial markets and insufficient debt-financed investment, rather than too much such investment.
Topic:: Debt, Markets, Investment, and Credit
Political Geography:: Global Focus

Author:: Jan Toporowski
Publication Date:: 03-2012
Content Type:: Working Paper
Institution:: School of Oriental and African Studies - University of London
Abstract:: The term „financialisation‟ is a recognition that finance has come to play a key role on the modern capitalist economy. But users of the term do not agree on its meaning and recognition of the growing scale of finance has not brought about an increased understanding of financial processes. The paper examines the reasons for increased turnover in financial markets. The main themes in the literature on financialisation are examined and shown to lack a coherent account of financial processes that goes beyond the evidence of financial activity.
Topic:: Debt, Finance, Credit, and Financialisation
Political Geography:: Global Focus

Author:: Charles Engel and John H. Rogers
Publication Date:: 09-2008
Content Type:: Working Paper
Institution:: Board of Governors of the Federal Reserve System
Abstract:: Survey data show that the expected growth rates of consumption across countries vary widely and are not highly correlated. This data contradicts the simplest of open-economy models in which there is a freely traded non- state-contingent bond and purchasing power parity holds. We explore two alternative explanations for the finding: that households in each country in effect face different ex ante real interest rates or that there are significant credit constraints, so that expected consumption growth rates are driven largely by expected income growth. The empirical evidence strongly supports the latter hypothesis. These findings challenge the modeling of consumption that is at the heart of many, if not most, macroeconomic models.
Topic:: Economics, Finance, Interest Rates, and Credit
Political Geography:: Global Focus

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