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41. Two Principles of Debt and national Income Dynamics in a Pure Credit Economy

Author:
Jan Toporowski
Publication Date:
04-2014
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
The paper puts forward two principles of national income dynamics in a pure credit economy. The first is the commonly known principle of Keynesian/Kaleckian economics according to which total output and employment in a capitalist economy is determined by the level of business investment. In turn that investment has to be financed, so that debt is inherent in such and economy. The second principle is a principle of the conservation of debt , which argues that, while new debt creates deposits in the economy, attempts to reduce debt generate deflationary processes that off-set debt reductions by creating ‘enforced’ debt in other parts of the economy. The analysis reinforces Minsky’s view that debt structures require corresponding investment to manage them, and that debt problems arise when such investment is insufficient.
Topic:
Debt, Economics, Investment, Economic Theory, Keynes, and Credit
Political Geography:
Global Focus

42. A Note on Credit Allocation, Income Distribution, and the Circuit of Capital (pdf)

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

43. Local Currency Sovereign Risk

Author:
Wenxin Du and Jesse Schreger
Publication Date:
12-2013
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Do governments default on debt denominated in their own currency? We introduce a new measure of sovereign credit risk, the local currency credit spread, defined as the spread of local currency bonds over the synthetic local currency risk-free rate constructed using cross currency swaps. We find that local currency credit spreads are positive and sizable. Compared with credit spreads on foreign currency denominated debt, local currency credit spreads have lower means, lower cross-country correlations, and are less sensitive to global risk factors. Global risk aversion and liquidity factors can explain more time variation in these credit spread differentials than macroeconomic fundamentals.
Topic:
Debt, Sovereignty, Currency, and Credit
Political Geography:
Global Focus

44. Fund Management and Systemic Risk: Lessons from the Global Financial Crisis

Author:
Elias Bengtsson
Publication Date:
02-2013
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
Fund managers play an important role in increasing efficiency and stability in financial markets. But research also indicates that fund management in certain circumstances may contribute to the buildup of systemic risk and severity of financial crises. The global financial crisis provided a number of new experiences on the contribution of fund managers to systemic risk. In this article, we focus on these lessons from the crisis. We distinguish between three sources of systemic risk in the financial system that may arise from fund management: insufficient credit risk transfer to fund managers; runs on funds that cause sudden reductions in funding to banks and other financial entities; and contagion through business ties between fund managers and their sponsors. Our discussion relates to the current intense debate on the role the so-called shadow banking system played in the global financial crisis. Several regulatory initiatives have been launched or suggested to reduce the systemic risk arising from non-bank financial entities, and we briefly discuss the likely impact of these on the sources of systemic risk outlined in the article.
Topic:
Financial Crisis, Risk, Credit, Liquidity, and Shadow Banking
Political Geography:
Global Focus

45. Examining Rupee Reserves in Bhutan: An SVAR Approach

Author:
Jigme Nidup
Publication Date:
10-2013
Content Type:
Journal Article
Journal:
Journal of Bhutan Studies
Institution:
Centre for Bhutan & GNH Studies (CBS)
Abstract:
The substantial deterioration of rupee reserves in 2012 had detrimental effect on the economic growth in Bhutan. Therefore, this study investigates the implication of government investment on construction, private credit expansion and imports from India, on the rupee reserves through a four-dimensional SVAR approach. The results indicate that in the immediate term, it is the government construction expenditure, private credit growth and imports from India that deteriorates the rupee reserves. Over the medium period, it is found that the government investment on construction leads to private credit expansion. Though government investment on construction is desired for economic growth, policy makers, however, should strategize investments so that it does not create rapid private credit growth.
Topic:
Finance, Credit, Imports, Public Investment, and Reserves
Political Geography:
South Asia, India, and Bhutan

46. Corporate Liquidity and Financial Fragility: The Role of Investment, Debt and Interest

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

47. Neologism as Theoretical Innovation in Economics: The case of 'Financialisation

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

48. Sovereign Credit Risk, Banks' Government Support, and Bank Stock Returns Around the World

Author:
Ricardo Correa, Kuan-Hui Lee, Horacio Sapriza, and Gustavo Suarez
Publication Date:
12-2012
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We explore the joint effect of expected government support to banks and changes in sovereign credit ratings on bank stock returns using data for banks in 37 countries between 1995 and 2011. We find that sovereign credit rating downgrades have a large negative effect on bank stock returns for those banks that are expected to receive stronger support from their governments. This result is stronger for banks in advanced economies where governments are better-positioned to provide that support. Our results suggest that stock market investors perceive sovereigns and domestic banks as markedly interconnected, partly through government guarantees.
Topic:
Sovereignty, Governance, Risk, Credit, Bonds, and Stock Markets
Political Geography:
Global Focus

49. 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

50. Full Issue

Author:
Sefi Atta, Kathleen Stassen Berger, Jacqueline Copeland Carson, Kinuthia Macharia, and Femi Ojo-Ade
Publication Date:
01-2011
Content Type:
Journal Article
Journal:
Ìrìnkèrindò: A Journal of African Migration
Institution:
Ìrìnkèrindò: a Journal of African Migration
Abstract:
CONTENTS Articles Independence Day — Sefi Atta....................................................................................................... 1 Immigration, Psychosocial Development: Implications for Africa and the US — Kathleen Stassen Berger ................................................................................................................. 30 “Africa” in Minnesota: New Models of Translocal Culture — Jacqueline Copeland Carson . 60 Criminal Convictions That Can Cause Non-U.S. Citizen Removal From The United States — Oláyínká Dánsàlámì ........................................................................................................ 71 African Immigrants in the Washington DC Metropolitan Area: Immigration Waves and Community Building — Kinuthia Macharia ................................................................... 79 Living In Paradise?: Africans In America— Femi Ojo-Ade ...................................................... 111 Rotatory Credit Schemes: A Comparative Analysis of an African Traditional Economic Institution in Contemporary Africa and its Diaspora — Iheanyi N. Osondu ................ 138 Oromo African Immigrants’ Experiences with Child Care — Deborah Ceglowski, Jaesook Gilbert, Greg Wiggan, Tekla Johnson, and Rosemary Traore ...................................... 166 Return Migration to Asmara, Eritrea: Readjustment Challenges — Berhane Keleta Chirum .. 221 Book Reviews Creating Africa in America: Translocal Identity in an Emerging World City — Jacqueline Copeland-Carson............................................................................................................ 245 Embracing the Infidel: Stories of Muslim Immigrants on the Journey West — Terri Bennett . 254 Film Reviews J’y Crois - I Believe in it: The Road to Decentralization in Mali, 2004 — Ekerete Udoh ........ 256 In Rwanda We Say…The Family That Does Not Speak Dies, 2004 — Ekerete Udoh ............ 258 The Price of Aid, 2004 — Ekerete Udoh .................................................................................. 260
Topic:
Migration, Diaspora, Immigration, Film, Credit, Identity, and Child Care
Political Geography:
Africa, Rwanda, Eritrea, Mali, and United States of America