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Begin New Search Topic Global Financial Crisis Political Geography Global Focus

11. When will the global economy return to rapid growth?

Author:
Marek Dabrowski
Publication Date:
12-2013
Content Type:
Policy Brief
Institution:
Center for Social and Economic Research - CASE
Abstract:
More than six years have passed since the subprime mortgage crisis began in the US in the summer of 2007. In the following year, it spread to the entire world economy. Its consequences have not been fully overcome yet. Thus it’s not surprising that economists’ attention has been largely devoted to short-term, crisis-related issues like financial deleveraging and repairing the balance sheets of governments, corporations and households. For the macroeconomic policy debate, this means concentrating on demand management by using monetary and fiscal policy tools in order to return to a pre-crisis growth path. Rarely has the question been asked of whether or not this is a realistic goal, i.e., whether post-crisis growth can return to pre-crisis levels. An analysis of growth perspectives in the medium-to-longterm calls for using the neo-classical growth theory, according to which there are three factors at play: labor, capital and total factor productivity (TFP). In this brief we will try to figure out what their expected dynamics are and how much each of them can contribute to economic growth in the foreseeable future.
Topic:
Economic Growth, Global Financial Crisis, Economic Policy, Macroeconomics, and Fiscal Policy
Political Geography:
Global Focus and Global Markets

12. Global Financial Conditions, Country Spreads and Macroeconomic Fluctuations in Emerging Countries

Author:
Ozge Akinci
Publication Date:
08-2013
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper uses a panel structural vector autoregressive (VAR) model to investigate the extent to which global financial conditions, i.e., a global risk-free interest rate and global financial risk, and country spreads contribute to macroeconomic fluctuations in emerging countries. The main findings are: (1) Global financial risk shocks explain about 20 percent of movements both in the country spread and in the aggregate activity in emerging economies. (2) The contribution of global risk-free interest rate shocks to macroeconomic fluctuations in emerging economies is negligible. Its role, which was emphasized in the literature, is taken up by global financial risk shocks. (3) Country spread shocks explain about 15 percent of the business cycles in emerging economies. (4) Interdependence between economic activity and the country spread is a key mechanism through which global financial shocks are transmitted to emerging economies.
Topic:
Development, Emerging Markets, International Cooperation, Financial Crisis, and Global Financial Crisis
Political Geography:
Global Focus

13. Monetary Policy in Emerging Market Economies: What Lessons From the Global Financial Crisis?

Author:
Brahima Coulibaly
Publication Date:
02-2012
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
During the 2008-2009 global financial crisis, emerging market economies (EMEs) loosened monetary policy considerably to cushion the shock. In previous crises episodes, by contrast, EMEs generally had to tighten monetary policy to defend the value of their currencies, to contain capital flight, and to bolster policy credibility. Our study aims to understand the factors that enabled this remarkable shift in monetary policy, and also to assess whether this marks a new era in which EMEs can now conduct countercyclical policy, more in line with advanced economies. The results indicate statistically significant linkages between some characteristics of the economies and their ability to conduct countercyclical monetary policy. We find that macroeconomic fundamentals and lower vulnerabilities, openness to trade, and international capital flows, financial reforms, and the adoption of inflation targeting all facilitated the conduct of countercyclical policy. Of these factors, the most important have been the financial reforms achieved over the past decades and the adoption of inflation targeting. As long as EMEs maintain these strong economic fundamentals, continue to reform their financial sector, and adopt credible and transparent monetary policy frameworks such as inflation targeting, the conduct of countercyclical monetary policy will likely be sustainable.
Topic:
Economics, Emerging Markets, Monetary Policy, and Global Financial Crisis
Political Geography:
Global Focus

14. Beyond the Global Financial Crisis: Structural Continuities as Impediments to a Sustainable Recovery

Author:
Ziya Önis and Mustafa Kutlay
Publication Date:
01-2012
Content Type:
Journal Article
Journal:
All Azimuth: A Journal of Foreign Policy and Peace
Institution:
Center for Foreign Policy and Peace Research
Abstract:
There has scarcely been a day in the last three years when we have not read depressing headlines in the newspapers about the global economic crisis. The current turmoil, which many experts concur in seeing as the worst jolt to the world economy since the Great Depression, is pushing the parameters of the established system to its limits. One could say that we see, in the short-term measures taken against the crisis at the time, an effective anti-crisis strategy. But ironically, the promptness with which these short-term measures were enacted prevented adequate questioning of the dominant paradigm which had caused the crisis. As a result, the structural problems leading to the crisis were not reduced. Despite the occurrence of the deepest economic crisis to be experienced since the Great Depression, the present economic emergency did not shake the neoclassical economic paradigm as strongly as was needed. A puzzle that this study aims to solve arises here: Why and how has the conventional wisdom survived and reproduced its intellectual hegemony even after the “most devastating economic crisis” since the Great Depression?
Topic:
Economics, Economic structure, Global Financial Crisis, Recovery, Lobbying, and Regulatory Capture
Political Geography:
Global Focus

15. Good Regulation is Good Governance 101

Author:
K N Vaidyanathan
Publication Date:
12-2011
Content Type:
Special Report
Institution:
Gateway House: Indian Council on Global Relations
Abstract:
In 1925, at the time that Britain reverted to the gold standard, Winston Churchill, then Chancellor, said that he would like to see ‘finance less proud and industry more secure.’ The move was criticized by economists for overvaluation of the British Pound; but the quote was prescient and is especially relevant today, when the hubris of the financial markets has fractured the global economy so excessively. Course correction so far has relied on bailouts. Instead what is immediately needed is the observance of good governance in regulation and in the long term, a restructuring of the regulatory architecture. Key to this is the recovery of ground lost by the regulator in ensuring market integrity, reinforcement of the currency of financial markets viz., trust, and deliverance of market stability which will help the underlying economy and the society at large. In sum: ensuring good regulation through good governance. This is the challenge before regulators today. The impact and import of the global financial crisis can be judged by two simple numbers: global market capitalization and GDP growth. (Source – the World Federation of Exchanges www.world-exchanges.org data.worldbank.org), They grew from $17.1 trillion and $27.5 trillion in 1990 to $ 64.5 trillion and $ 63.2 trillion, in 2007 respectively. A year later, market capitalization had almost halved to $ 33.5 trillion while GDP growth fell from over 5% to 3% in 2008 and -0.5% in 2009. The crisis that surfaced in 2007 has already peaked twice, in 2008 and 2011, and is far from over. In every analysis, financial market regulators have been accused of sleeping at their desks, held captive by the industry, remaining benign as the party went on and even abetting the excesses both wittingly and unwittingly.
Topic:
Markets, Governance, Regulation, Economy, and Global Financial Crisis
Political Geography:
Global Focus

16. Financial Frictions, Trade Credit, and the 2008-09 Global Financial Crisis

Author:
Brahima Coulibaly, Horacio Sapriza, and Andrei Zlate
Publication Date:
06-2011
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper studies the role of the credit crunch in the severe contraction of economic activity during the 2008-09 global financial crisis, using firm-level data from six emerging Asian economies. After controlling for the effect of falling demand, we find that sales declined by less for firms with better pre-crisis financial conditions. Amid the decline in external financing opportunities, some firms relied more on trade credit from suppliers during the crisis, which allowed them to post relatively better sales. Export-intensive firms resorted less to trade credit as an alternative source of finance, which contributed to their larger declines in sales.
Topic:
Finance, Global Financial Crisis, Trade, and Credit
Political Geography:
Global Focus

17. On the Solvency of Nations: Are Global Imbalances Consistent with Intertemporal Budget Constraints?

Author:
Ceyhun Bora Durdu
Publication Date:
06-2009
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Theory predicts that a nation's stochastic intertemporal budget constraint is satisfied if net foreign assets (NFA) are integrated of any finite order, or if net exports (NX) and NFA satisfy an error- correction specification with a residual integrated of any finite order. We test these conditions using data for 21 industrial and 29 emerging economies for the 1970-2004 period. The results show that, despite the large global imbalances of recent years, NFA and NX positions are consistent with external solvency. Country-specific unit root tests on NFA-GDP ratios suggest that nearly all of them are integrated of order 1. Pooled Mean Group error-correction estimation yields evidence of a statistically significant, negative response of the NX-GDP ratio to the NFA-GDP ratio that is largely homogeneous across countries.
Topic:
Debt, Budget, Global Financial Crisis, and Economic Inequality
Political Geography:
Global Focus