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1. The Implementation of Sustainability Taxonomies: The Case of South Africa

Author:
Sören Hilbrich, Kathrin Berensmann, Giovanna Artmann, Sam Ashman, and Theresa Herbold
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
German Institute of Development and Sustainability (IDOS)
Abstract:
In recent years, many jurisdictions have developed sustainability taxonomies that aim to increase transparency of financial markets and redirect capital flows to sustainable investments. Such sustainable finance policies can be important levers because today’s investments shape economic production processes for decades. This case study on South Africa’s Green Finance Taxonomy (GFT) addresses the question of what factors influence the adoption of sustainability taxonomies by potential users. It finds that one year after its publication, the GFT has hardly been used in practice. Important factors hindering an effective implementation are a lack of regulatory embedding, the absence of a legal recognition of the GFT by the European Union (EU), a hesitancy among financial market participants to build capacities to collect the necessary data, and fossil-fuel path dependencies in South Africa’s economy. These findings have important policy implications (e.g. regarding accompanying governance measures) for implementation processes in many countries in the coming years.
Topic:
Development, Economy, Capital Flows, Investment, and Sustainability
Political Geography:
Africa and South Africa

2. Europe should not neglect its capital markets union

Author:
Maria Demertzis, Marta Dominguez-Jimenez, and Lionel Guetta-Jeanrenaud
Publication Date:
06-2021
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
The European Union’s capital markets remain very underdeveloped compared to the United States. The market for equity, as measured as the size of the total market capitalisation of listed domestic firms relative to GDP, is much larger in the US and in Japan than in Europe.
Topic:
European Union, GDP, and Capital Flows
Political Geography:
Japan, Europe, and United States of America

3. Analysis of Determinants of Foreign Capital Flow: Focused on Interest Rate and Exchange

Author:
Deok Ryong Yoon, Wongho Song, and Jinhee Lee
Publication Date:
05-2021
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
As the linkage between domestic and foreign financial markets grows stronger, concerns have been raised about the inflow and outflow of foreign investment capital as a source of financial instability whenever the financial market becomes unstable. Considering that opening the capital market is not an option, it becomes essential to examine the determinants of foreign investment to maximize the benefits of foreign capital inflows and outflows for sound growth in the real sector as well as the financial sector. Accordingly, this study attempts to produce evidence-based policy implications by empirically analyzing the determinants of the inflow and outflow of foreign investment funds.
Topic:
Foreign Exchange, Markets, Capital Flows, Investment, and Interest Rates
Political Geography:
Global Focus

4. Uncertain prospects for sovereign wealth funds of Gulf countries

Author:
Julien Maire, Adnan Mazarei, and Edwin M. Truman
Publication Date:
02-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Among the best-known sovereign wealth funds (SWFs)—government-owned or controlled investment vehicles—are those funded by hydrocarbon revenues in the member economies of the Gulf Cooperation Council (GCC), which comprises all the Arab countries in the Persian Gulf except Iraq, namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. This Policy Brief compares the GCC SWFs with each other and with other funds in terms of their transparency and accountability on the fifth SWF scoreboard, available here. Several factors, including the decline in oil prices in recent years, have slowed the growth of the GCC’s SWFs. This slower growth could further diminish their governance and transparency standards, which are already weaker than those of other SWFs. Efforts to improve their governance and accountability will be important to garner public support for these SWFs.
Topic:
Energy Policy, Government, Markets, Governance, Regulation, and Capital Flows
Political Geography:
Middle East and Gulf Nations

5. New Productivity Drivers: Revisiting the Role of Digital Capital, FDI and Integration at Aggregate and Sectoral Levels

Author:
Amat Adarov and Robert Stehrer
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
The paper studies the drivers of productivity at country and sectoral levels over the period 2000-2017 with the focus on the impact of capital accumulation and structure. The analysis confirms an especially important role of ICT and intangible digital capital for productivity growth, particularly in the manufacturing sectors. While backward global value chain participation and EU integration are also found to be instrumental for accelerating productivity growth, the impact of inward foreign direct investment is not robustly detected when the data is purged from the effects of special purpose entities and outlier countries.
Topic:
Economics, Foreign Direct Investment, European Union, Digital Economy, Capital Flows, and Trade
Political Geography:
Europe and Global Focus

6. Bitter Chocolate: Wealth Extraction in Côte d'Ivoire

Author:
Jean Merckaert
Publication Date:
07-2020
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
The cocoa sector has been at the heart of Côte d'Ivoire economy since independence. The country has become the largest producer of cocoa in the world (40%). In the two first decades of independence, impressive economic growth was fueled by cocoa exports. But the Ivorian miracle evaporated after the collapse of cocoa prices and the debt soaring. The country plunged into a serious economic crisis, followed by a political crisis that culminated in civil war in the early 2000s. The primary commodity sector in Côte d’Ivoire has been highly vulnerable to illicit financial flows. Large and persistent discrepancies between Côte d'Ivoire’s cocoa export statistics and the cocoa import statistics of major partners such as the Netherlands, Germany and France are indicative of substantial capital flight through export misinvoicing. With a focus on the four major periods in Ivorian political history, this paper analyzes the trend of illicit financial outflows in the cocoa sector, the mechanisms of resource rent capture and personal enrichment that fuel them, the key national and foreign players, and their ongoing responsibilities. Under the Houphouët-Boigny regime (1960-1993), through the management of the country’s Agricultural Product Stabilization and Support Fund, the president had full control over the cocoa sector and used it to enrich himself and his associates. He and his successor Bédié (1993-1999) colluded with exporting companies in which Ivorian political leaders were shareholders. Under Gbagbo (2000-2010), the cocoa rent was the main source of funding for the civil war. The techniques of the Forces Nouvelles in the North and government forces in the South were similar: taxing cocoa production and exports, and illegally exporting part of the output to neighboring Burkina Faso and Ghana. Under the Ouattara regime (2011-2020), despite a series of reforms aimed at good governance, the cocoa sector has remained highly concentrated in the hands of a few corporate giants and plagued with favoritism, while predation in other sectors too persisted. The persistence of capital flight suggests the political economy of cocoa remains deeply rooted in the colonial scheme. Be it state-led or market-led, dominated by foreign or domestic players, the Ivorian cocoa sector has remained the place for wealth extraction to the benefit of a handful members of the elite. Overcoming primary commodity dependence is essential for equitable development.
Topic:
Political Economy, Natural Resources, Capital Flows, Commodities, Capital Flight, Chocolate, and Wealth Extraction
Political Geography:
Africa and Côte d'Ivoire

7. Contraband, Drug Trafficking and the Configuration of Institutional Circuits for their Protection in Mexico / Contrabando,tráficodedrogasylaconfiguracióndecircuitosinstitucionalesparasuprotecciónenMéxico

Author:
Carlos Antonio Flores Pérez
Publication Date:
06-2019
Content Type:
Working Paper
Institution:
International Security Studies Group (GESI) at the University of Granada
Abstract:
In this article analyses the evolution, throughout the XX century, of criminal networks that had participation in illicit trafficking goods and illegal psychoactive drugs- in the Mexican states of Nuevo León and Tamaulipas, in the border with Texas, United States. Based on the information contained in government documents found in the General Archive of the Nation (AGN) of Mexico, federal criminal courts of the United States and newspaper sources, I show the central role played by federal and state institutional actors to consolidate these networks and their illegal activities through the guarantee of impunity. These actors, along with their partners in the business and criminal fields, set up institutional circuits to protect such traffics and allow the integration of illicit capital in the formal economy.
Topic:
Crime, Narcotics Trafficking, Economy, and Capital Flows
Political Geography:
Central America, North America, Mexico, and United States of America

8. Volume 69 Issue 1

Author:
Muhittin Kaplan
Publication Date:
01-2019
Content Type:
Journal Article
Journal:
Istanbul Journal of Economics
Institution:
Istanbul University Faculty of Economics
Abstract:
Istanbul Journal of Economics-İstanbul İktisat Dergisi is an open access, peer-reviewed, scholarly journal published two times a year in June and December. It has been an official publication of Istanbul University Faculty of Economics since 1939. The manuscripts submitted for publication in the journal must be scientific and original work in Turkish or English. Being one of the earliest peer-reviewed academic journals in Turkey in the area of economics, Istanbul Journal of Economics-İstanbul İktisat Dergisi aims to provide a forum for exploring issues in basicly economics and publish both disciplinary and multidisciplinary articles. Economics is the main scope of the journal. However, multidisciplinary and comparative approaches are encouraged as well and articles from various social science areas such as sociology of economics, history, social policy, international relations, financial studies are welcomed in this regard. The target group of the journal consists of academicians, researchers, professionals, students, related professional and academic bodies and institutions.
Topic:
Economics, International Political Economy, Economic Growth, Political Science, and Capital Flows
Political Geography:
Russia, Turkey, and Global Focus

9. Push vs. Pull Factors of Capital Flows Revisited: A Cross-country Analysis

Author:
Tae Soo Kang and Kyunghun Kim
Publication Date:
02-2019
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
Capital market integration contributes to economic growth and it can be more beneficial for emerging market economies (EMEs, hereafter) at their early stages of development where the capital is relatively insufficient. An open capital market also enables investor to share the country-specific risks by holding foreign assets. However, there are also some negative side effects of capital market integration. Financial shocks originating in the center coun-try can be quickly propagated through the integrated financial market. The Global Financial Crisis (GFC, hereafter) is a good example of the contagion of the financial crisis. Volatile cross-border capital inflows and outflows nega-tively affect financial stability, which eventually lowers economic growth by causing financial crises. Despite of these negative side effects, capital market integration has been an inevitable long-term trend for many EMEs over the past few decades (Aizenman et al. 2010). There have been continuous capital flows to EMEs, which started even before GFC and this trend has been more pronounced during the U.S. zero-interest rate period (Ahmed and Zlate 2014). Though some monetary authorities in EMEs tried to moderate the procyclicality of credit flows by implementing policy instruments such as capital controls or macro-prudential policy measures after GFC (Kim and Mehrotra 2018), the common factors in the global financial market still play a crucial role in de-termining capital inflows to EMEs. The relationship between the global financial condition and its impact on capital inflows to EMEs, has been a long-debated issue. This issue concerns whether push or pull factors are the major determinant of capital flows. The push factor represents the common factor that exists in the global financial market or center countries, which influences capital inflows to peripheral countries. These factors are interest rates and GDP growth rates of advanced economies (AEs, hereafter), global risk factors such as VIX (S&P 500 Volatili-ty Index), and the commodity price index. The pull factor denotes domestic factors that attract funds from the global financial market to domestic finan-cial markets. These factors are domestic interest rates, domestic GDP growth rates, and other country-specific characteristics such as exchange rate regime, degree of the capital account openness, institutional quality, and stages of economic development. In previous literature, many scholars have found strong evidence for push factors being the major determinant of capital movement. The interest rates of mature economies and VIX are significant determinants of capital inflows to EMEs. However, there is only some evidence that higher domestic interest rates and higher domestic GDP growth rates pull capital from the center countries to individual EMEs (Koepke 2015). Related to this long-debated issue in academia, the Chairman of the Federal Reserve, Jerome H. Powell recently stated, "... I will argue that, while global factors play an important role in influencing domestic financial conditions, the role of U.S. monetary policy is often exaggerated." With this statement, he also pointed out that the slowdown in capital inflows to EMEs which has been happening ever since 2011 has been mainly due to the narrowing of GDP gaps between AEs and EMEs, i.e., the recent decrease in capital in-flows to EMEs can be attributed to the decline in EMEs' GDP growth rates given the fact that the U.S. GDP growth rate has picked up. In this paper, we revisit this issue of push and pull factors of capital inflows. To this end, we consider the heterogeneity that exists in EMEs by dividing them into four subgroups. We investigate which is the main driver of capital inflows between push and pull factors across country groups. Categorizing subgroups is important for two reasons. First, EMEs are so heterogeneous that we make subgroups which share similar economic fundamentals by re-gions. Second, making subgroups across EMEs is an effective way to indi-rectly consider the regional contagion effect. With this cross-country analysis, we can figure out the differing effects of push and pull factors across country groups, and this can eventually lead to the development and implementation of appropriate policy instruments. Our empirical finding shows that the push and pull factors play a different role in determining capital inflows to AEs and EMEs. The major drivers of capital inflows to AEs are both push and pull factors, but push factors turn out to be the main determinant of capital inflows to EMEs. When EMEs are divided into four subgroups, we find sizable heterogeneity across subgroups. In Asian countries, both push and pull factors are significant, which is similar to AEs, but only U.S. interest rate plays a major role in Eastern Europe. Some pull factors are important in Latin American countries and other EMEs, but these are not robust to alternative empirical models and measures.
Topic:
Capital Flows, Economic Policy, Push Factor, and Pull Factor
Political Geography:
Global Focus

10. Something for Nothing? How Growing Rent-seeking is at the Heart of America’s Economic Troubles

Author:
Lachlan Carey and Amn Nasir
Publication Date:
05-2019
Content Type:
Journal Article
Journal:
Journal of Public and International Affairs (JPIA)
Institution:
School of Public and International Affairs (SPIA), Princeton University
Abstract:
The following paper studies three main questions: First, What is the association between increasing concentration and labor and profit shares? Second, is this effect different across sectors? Third, is this effect uniform across advanced economies? The paper finds that while there is a negative relationship between concentration and labor share and a positive relationship between concentration and profit share, the result is more pronounced in the United States than in similar advanced European economies. Moreover, the results are stronger for the manufacturing sector than for the services sector. The paper concludes that this evidence suggests that deviations from perfect competition are likely explained by declining competition in the U.S., whereas these secular trends, such as heterogeneous technology adoption and the declining price of capital, are more likely at play in Europe. Consequently, the paper prioritizes pre-distribution over redistribution.
Topic:
Labor Issues, Economy, Business, and Capital Flows
Political Geography:
United States of America and North America