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362. Does the Level of Public Debt Matter?
- Author:
- Susan Schadler
- Publication Date:
- 04-2016
- Content Type:
- Policy Brief
- Institution:
- Centre for International Governance Innovation (CIGI)
- Abstract:
- Research on links between the level of a country’s public debt and its broader economic developments has been heatedly debated in the economic literature. Two strands of the research stand out — one linking the level of debt to a country’s GDP growth rate and the other examining the debt level as an EWI of economic crises. As a broad generalization, research at the moment favors the view that high levels of debt are not a cause, in and of themselves, of low growth nor are they particularly good predictors of impending economic or even debt crises. In principle, the empirical findings have obvious implications for policy makers confronting the question of how to fashion policies (and fiscal policy in particular) when a country has a high debt burden. The IMF, as both a contributor to the literature and an adviser concerned with preventing or dealing with debt crises, has a particularly important stake in navigating the findings. Whether in its surveillance (routine annual advice to all member countries) or the construction of its lending programs to support countries in or near crisis, the IMF must answer the question “how much does the level of debt matter?” Despite the empirical research that casts doubt on the importance of debt, the level of debt figures prominently in the algebra of debt sustainability and the IMF’s real world policy advice. This policy brief examines the nexus of the relatively strong conclusions coming from the academic research and the IMF’s policy advice. It addresses the following question: given that the broad conclusion from the academic literature is that the level of debt itself is not systematically bad for growth or stability, why does the debt level seem to figure rather prominently in the IMF’s policy advice and conditionality?
- Topic:
- Debt, Development, Economics, International Monetary Fund, Financial Crisis, GDP, and Global Markets
- Political Geography:
- Global Focus
363. Have Macroeconomic Rules of the Game Changed? Some Clues from the Phillips Curve
- Author:
- Samuel Howorth, Domenico Lombardi, and Pierre Siklos
- Publication Date:
- 02-2016
- Content Type:
- Policy Brief
- Institution:
- Centre for International Governance Innovation (CIGI)
- Abstract:
- Students of macroeconomics will have heard about the central role played by the so-called Phillips curve in both theoretical and empirical analyses for almost 70 years. In 1958, A. W. Phillips reported an inverse relationship between changes in wages and the unemployment rate (Phillips 1958). The progeny of his thinking led to a revolution both in policy making and in the development of theoretical links between the real and nominal macroeconomic variables. Names such as Samuelson, Solow, Phelps, Friedman, Lucas and Sargent became associated with refinements and enhancements of the core finding reported by Phillips. Indeed, all of these economists went on to become Nobel laureates in economics, although not exclusively because of their contributions to the analysis of what has since been called the Phillips curve. Indeed, the concept is so influential that it spawned several different versions of the trade-off used to guide policy makers as a menu for the choices they face when deciding whether the gains from lower inflation are offset by the economic costs of higher unemployment. Initially, expectations of individuals or firms were ignored. This briefly gave policy makers the impression that they could simply select an inflation-unemployment combination and implement the necessary policy mix to achieve the desired outcome. Once a role for expectations was incorporated, debate centred on how forward-looking individuals are. The more forward-looking, the less likely it was that policy makers would be able to “exploit” the trade-off because, unless wages rose in purchasing-power terms, the gains from lower unemployment would, at best, be temporary once workers realized that the higher inflation, at unchanged wages, actually drives real wages down. Indeed, the pendulum swung all the way to the conclusion — reached by the 1970s and early 1980s — that the Phillips curve was illusory and there was no trade-off policy makers could exploit.
- Topic:
- Economics, Human Welfare, International Political Economy, Labor Issues, and Global Markets
- Political Geography:
- Global Focus
364. Jurisdiction on the Internet: From Legal Arms Race to Transnational Cooperation
- Author:
- Bertrand de la Chapelle and Paul Fehlinger
- Publication Date:
- 04-2016
- Content Type:
- Working Paper
- Institution:
- Centre for International Governance Innovation (CIGI)
- Abstract:
- The past 20 years have witnessed a profound change in the types of non-resident investors who provide funding to emerging market economies (EMEs) and the financial instruments through which emerging market (EM) corporations borrow from abroad. Until the beginning of the new millennium, private capital flows to EMEs were mainly intermediated by large global banks, and EMEs were subjected to massive volatility in their external payments balances, exchange rates and domestic financial systems. But since the early 2000s the role of bank-intermediated credit has declined, as the base of investors willing to take on exposure to EM corporate debt has become much larger and more diverse. These structural changes have encouraged a vast growth in flows of funds, not only from the mature economies to EMEs as a group, but also among EMEs themselves.
- Topic:
- Debt, Economics, Emerging Markets, International Trade and Finance, and Financial Crisis
- Political Geography:
- Global Focus
365. The Impact of Sustainability Codes of Conduct in the Financial Sector
- Publication Date:
- 02-2016
- Content Type:
- Working Paper
- Institution:
- Centre for International Governance Innovation (CIGI)
- Abstract:
- This paper analyzes the impact of four major financial sector sustainability codes of conduct, the UN Environmental Programme Finance Initiative, the UN Principles for Responsible Investment, the Equator Principles and the Global Alliance for Banking on Values with regard to their impact on the sustainability of their members. The codes of conduct focus on the integration of environmental, social and governance criteria into financial decision making in lending, investment, asset management and project finance. corporate sustainability voluntary codes of conduct have a positive impact on their members. The effectiveness, however, depends on the quality and content of a code, as well as on implementation and compliance mechanisms.
- Topic:
- Economics, International Trade and Finance, Markets, United Nations, and Ethics
- Political Geography:
- Global Focus
366. Porous Borders: The Study of Illegal Markets from a Sociological Perspective.
- Author:
- Matias Dewey
- Publication Date:
- 02-2016
- Content Type:
- Working Paper
- Institution:
- Max Planck Institute for the Study of Societies
- Abstract:
- State concerns about crime and security issues have strongly affected conceptions of economic action outside the law, a traditional field of research in sociology. This increasing encroachment by policy-related concerns on the intellectual framework of the discipline has led, on one hand, to an almost exclusive focus on criminal organizations in the analyses of illegal economic activity. On the other hand, it has led to the downplaying of the importance of classic topics of sociological reflection, such as the embeddedness of action, the moral dimension of illegal products, or the relationship between social change and the spread of illegal exchanges. This short paper problematizes economic action outside the law by taking legal definitions and their effects seriously. It begins with the problem of naturalizing state definitions. This is followed by a discussion of the illegality of illegal markets, which illustrates sociological contributions. Finally, three dimensions of the study of illegal markets are suggested. Overall, the paper lays out a research program for this field of sociological inquiry.
- Topic:
- Security, Economics, Markets, and Sociology
- Political Geography:
- Global Focus
367. Implications of Mega Free Trade Agreements for Asian Regional Integration and RCEP Negotiation
- Author:
- Fukunari Kimura and Lurong Chen
- Publication Date:
- 03-2016
- Content Type:
- Policy Brief
- Institution:
- Economic Research Institute for ASEAN and East Asia (ERIA)
- Abstract:
- As mega free trade agreements (FTAs) are reshaping the rules of global governance, there is urgency for member states of the Association of Southeast Asian Nations (ASEAN) to take proper actions in response to the changing world economic order. On one hand, they should closely observe the progress of negotiations and follow up the issues that are under discussion in mega FTAs. On the other hand, they have to accelerate the pace in concluding the negotiations of the Regional Comprehensive Economic Partnership (RCEP).
- Topic:
- Economics, International Trade and Finance, and Global Political Economy
- Political Geography:
- Southeast Asia and Global Focus
368. Assessing the Governance Practices of Sustainability Reporting
- Author:
- Jason Thistlethwaite and Melissa Menzies
- Publication Date:
- 01-2016
- Content Type:
- Policy Brief
- Institution:
- Centre for International Governance Innovation (CIGI)
- Abstract:
- To promote climate change risk mitigation in financial markets, the Financial Stability Board recently proposed the creation of a Climate Disclosure Task Force, coordinated through the G20, to develop standards for companies to disclose their exposure to climate change risks. With more than 400 existing disclosure schemes, this task will be challenging. This brief identifies the key categories of governance practices that must be addressed, how these divergent practices challenge end-users, and how the establishment of criteria that define effective and efficient reporting is a critical first step for the Climate Disclosure Task Force.
- Topic:
- Climate Change, Economics, Markets, and Financial Crisis
- Political Geography:
- Global Focus
369. A Method for Agent-Based Models Validation
- Author:
- Mattia Guerini and Alessio Moneta
- Publication Date:
- 03-2016
- Content Type:
- Working Paper
- Institution:
- Institute for New Economic Thinking (INET)
- Abstract:
- This paper proposes a new method to empirically validate simulation models that generate artificial time series data comparable with real-world data. The approach is based on comparing structures of vector autoregression models that are estimated from both artificial and real-world data by means of causal search algorithms. This relatively simple procedure is able to tackle both the problem of confronting theoretical simulation models with the data and the problem of comparing different models in terms of their empirical reliability. The paper also provides an application of the validation procedure to the Dosi et al. (2015) macro-model.
- Topic:
- Economics, Economic Theory, Data, and Models
- Political Geography:
- Global Focus
370. Full Employment, Open Economy Macroeconomics, and Keynes’ General Theory: Does the Swan Diagram Suffice?
- Author:
- Paul Davidson
- Publication Date:
- 02-2016
- Content Type:
- Working Paper
- Institution:
- Institute for New Economic Thinking (INET)
- Abstract:
- This paper provides critical comments on the Peter Temin - David Vines promotion of the basic Swan Diagram as (1) a policy tool to encourage any individual debtor nation experiencing balance of payment deficits to reduce its exchange rate in order to expand exports and reduce imports and (2) the Swan Diagram as a simple model for understanding Keynes’s General Theory for an Open Economy. This paper explains that the Swan Diagram is completely incompatible with Keynes’s analysis. Instead Keynes advocated that the onus should be placed on creditor nations to correct international payments imbalances and thereby promote economic expansion internationally. Keynes warned against any deficit nation adopting a policy that tries to achieve a balance in its international payments by following any policy designed to reduce imports and increase exports. Such a policy sends a contractionary force onto the international economy and tends to injure all trading partners.
- Topic:
- Economics, Employment, Economic Theory, Macroeconomics, Unemployment, and Job Creation
- Political Geography:
- Global Focus