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Begin New Search Topic Economic Crisis Political Geography Global Focus

1. Covid-19 Crisis and Shifts in the Corporate Competitive Landscape: Comparisons with Previous Economic Crises

Author:
Sang-Ha Yoon, Yaein Baek, Wontae Han, Yoonsoo Lee, and Daisoon Kim
Publication Date:
04-2023
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
In terms of economic fluctuations, it is well recognized that the effects of an economic crisis have a detrimental impact on the entry, growth, decline, and exit of firms. In addition, the magnitude of the impact varies both within and between industries depending on the size and other characteristics of the firm. The economy is going through significant changes due to the emergence of new industries and the decline or disappearance of current ones. This study looks at how big economic events like the COVID-19 pandemic and the global financial crisis have affected businesses and industries. After completing a study at several levels of top international corporations, larger domestic enterprises, and domestic small and medium-sized businesses, it attempts to draw policy implications. First, it is necessary to foster and support top-tier companies to defend against global economic fluctuations and strengthen international competitiveness. In particular, the institution in charge of competition policies domestically and the institution that helps companies improve their competitiveness are different and the focus of policies is distinctive, so comprehensive attention and perspective of policymakers are needed. Second, it is urgent to respond to new issues related to competition policy in the domestic market. The behavior of emerging big tech and platform companies is different from monopoly companies in the past, so consumer welfare is not impaired, but it burdens nearby and other market participants. Therefore, a view that deviates from the focus on monopoly pricing is also essential for competition policy. Third, measures to support global corporate growth and countermeasures against changes in the industrial landscape should be prepared. Investment and R&D expansion at the corporate level is essential for corporate growth, and measures are needed to boost investment in recently emerging intangible assets. In addition, it is important to revitalize the movement of economic resources to cope with changes in the inter-industry landscape accompanied by the crisis. Fourth, policies to revitalize start-ups and closures are required. The decline in new companies' market entry and exit rates is a symtom of an aging economy contributing to the overall decrease in productivity. Therefore, enhancing the revitalization of the corporate ecosystem and expanding the size of enterprises are essential to enhance the dynamics of the economy. Fifth, it is necessary to find an appropriate combination of government roles in times of crisis. In particular, it is important to grasp the detailed status of economic stabilization policies in relation to SMEs, and at the same time, clear judgments on the appropriate size of support measures, the period of support, and the timing of collection are urgently needed.
Topic:
Economics, COVID-19, Corporations, Economic Crisis, and Competition
Political Geography:
Global Focus

2. When the Economic Road Ends: Is Another Great Depression on the Horizon?

Author:
Tuomas Malinen
Publication Date:
08-2023
Content Type:
Journal Article
Journal:
Baku Dialogues
Institution:
ADA University
Abstract:
We begin with a quintessential American expression: “uh oh.” Those words very likely embody the thoughts of the chief examiner of the U.S.-based Silicon Valley Bank (SVB) on 10 March 2023, the day when that bank faced a cataclysmic run on its deposits. In just two days, SVB customers tried to pull an astonishing 87% of deposits from the bank. It is obvious that no bank can survive such an onslaught. SVB was destined to fail. And so, it did—on that very day, in fact. Jonathan Rose, a historian and Senior Economist at the Federal Reserve Bank of Chicago, has published an eye-opening inquiry into the historical parallels of the runs on Silicon Valley Bank, Silvergate, Signature Bank, and First Republic in a recent article in the academic journal Economic Synopses. His research paints a startling picture on the scope of those runs, placing them in the context of the history of the largest depositor runs in the U.S. banking system between 1934 and 2021. Rose found that the most destructive bank runs in the period following the Great Depression of the 1930s and before 2022 have been the runs on Continental Illinois and Trust (which commenced on 7 May 1984), Washington Mutual (8 September 2008) and Wachovia (15 September 2008). They saw a deposit outflows of 30%, 10.1%, and 4.4% of total deposits, respectively. To note, the run on Continental Illinois in 1984 was already a largely electronic one due to automated wire transfers, and thus “lightning fast.” The outflow from Silvergate was 52% (during Q4 2022); on SVB it was 87% (10 March 2023 + expected during the next day); on Signature it was 29% (10 March 2023 + expected next day); and on First Republic it was 57% (approx. between 10-24 March). These are truly historical figures, matching those seen during the Great Depression. Many authorities and analysts are currently pondering what this all means for banks, their deposits, and countries in general, and where we could be heading. In this essay, I will explain why authorities have caused the ongoing crisis, why is it likely to get much worse, and what this implies for the world. I will conclude with a bit of unsolicited advice on how a certain category of countries, which includes Azerbaijan, can prepare and even benefit from its effects.
Topic:
Economics, Great Depression, Banking, and Economic Crisis
Political Geography:
Azerbaijan and Global Focus

3. Corruption and crisis: do institutions matter?

Author:
Shrabani Saha and Kunal Sen
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
While the short-term effects of the COVID-19 pandemic on lives and livelihoods are well understood, we know little about the effect of the pandemic for longer-term outcomes such as corruption. We look at the historical data on political and economic crises to assess what we can learn from the long-term effects of past crises on corruption. We hypothesize that strong rule of law institutions may ameliorate the possible adverse effects of political and economic crises on corruption. We test our hypotheses using panel data for over 100 countries during the years 1800– 2020. The results suggest heterogeneous effects depending on the type of crisis and how we measure it. We find that rule of law institutions can control corruption in cases of political violence and economic slowdown, but the effect is not seen for democracy breakdowns, coups, armed conflict and civil war, and economic crisis such as currency and debt crisis.
Topic:
Corruption, Politics, Rule of Law, Institutions, Data, COVID-19, and Economic Crisis
Political Geography:
Global Focus

4. COVID-19 Future Trends: Impacts on Children and the Search for Opportunities

Author:
Sol Pradelli
Publication Date:
10-2020
Content Type:
Special Report
Institution:
Elevate Children Funders Group
Abstract:
This short thought-piece was commissioned by ECFG in September 2020 to help members navigate the uncertainty around how COVID would impact children in the longer-term. The paper includes a desk review of the impacts of previous pandemics and economic crises on children; an overview of likely impacts for children of the COVID crisis, including projections by age cohort; four potential scenarios and related planning questions; recommendations for funding, advocacy, and research; and a bibliography of key resources and reports.
Topic:
Children, Advocacy, COVID-19, Funding, and Economic Crisis
Political Geography:
Global Focus

5. The Focus of Academic Economics: Before and After the Crisis

Author:
Ernest Aigner, Matthias Aistleitner, Florentin Glötzl, and Jakob Kapeller
Publication Date:
05-2018
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Has the global financial crisis of 2007ff had a visible impact on the economics profession? To answer this question we employ a bibliometric approach and compare the content and orientation of economic literature before and after the crisis with reference to two different samples: A large-scale sample consisting of more than 440,000 articles published between 1956 and 2016 and a smaller sample of 400 top-cited papers before and after the crisis. Our results suggest that – unlike the Great Depression of the 1930s – the current financial crisis did not lead to any major theoretical or methodological changes in contemporary economics, although the topic of financial instability received increased attention after the crisis.
Topic:
Economics, Academia, and Economic Crisis
Political Geography:
Global Focus

6. International Financial Spillovers to Emerging Market Economies: How Important Are Economic Fundamentals?

Author:
Shaghil Ahmed, Brahima Coulibaly, and Andrei Zlate
Publication Date:
05-2015
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We assess the importance of economic fundamentals in the transmission of international shocks to financial markets in various emerging market economies (EMEs). Our analysis covers the so-called taper-tantrum episode of 2013 and six earlier episodes of severe EME-wide financial stress since the mid-1990s. Cross-country regressions lead us to the following results: (1) EMEs with relatively better economic fundamentals suffered less deterioration in financial markets during the 2013 taper-tantrum episode. (2) Differentiation among EMEs set in quite early and persisted throughout this episode. (3) Controlling for economic fundamentals, we also find that, during the taper tantrum, financial conditions deteriorated more in those EMEs that had earlier experienced larger private capital inflows and greater exchange rate appreciation. (4) For earlier episodes, we find little evidence of investor differentiation across EMEs being explained by differences in their relative vulnerabilities during EME crises of the 1990s and early 2000s. (5) That said, differentiation across EMEs based on fundamentals does not appear to be unique to the 2013 episode. Differences in economic fundamentals played a role in explaining the heterogeneous EME financial market responses during the global financial crisis of 2008, and the role of fundamentals appeared to progressively increase through the European crisis in 2011 and subsequently the 2013 taper tantrum.
Topic:
Economics, Emerging Markets, Markets, Exchange Rate Policy, Fiscal Policy, and Economic Crisis
Political Geography:
Global Focus

7. Crisis? What Crisis? The World Bank and Housing Finance for the Poor

Author:
Elisa Van Waeyenberge
Publication Date:
07-2015
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
This paper provides a critical assessment of the Bank’s housing policies, against the backdrop of far- reaching transformations of the financial sector across the world and a persistently dire shelter situation in developing countries. It situates the Bank’s housing stance historically since its initial involvement in the sector in the early 1970s. This allows to shed light on systemic and analytical tendencies bearing on Bank housing policy with significant implications for the Bank’s current policy stance, including its response (or lack thereof) to the dramatic experience with housing finance laid bare through the global financial and economic crisis.
Topic:
International Cooperation, Poverty, World Bank, Finance, Housing, and Economic Crisis
Political Geography:
Global Focus

8. Sovereign Debt Crises

Author:
Ricardo Correa and Horacio Sapriza
Publication Date:
05-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Sovereign debt crises have been recurrent events over the past two centuries. In recent years, the timing of sovereign crises has coincided or has directly followed banking crises. The link between sovereigns and banks tightened as the contingent liability that the banking sector represents for the sovereign grew, as financial "safety nets" became more common. This chapter analyzes the transmission channels between sovereigns and banks, with a focus on the effect of sovereign distress on bank solvency and financing. It then highlights the notable cost to the real economy of the close connection between sovereigns and banks. Breaking the "feedback loop" between these two sectors should be an important policy priority.
Topic:
Debt, Sovereignty, Banking, and Economic Crisis
Political Geography:
Global Focus

9. Understanding the Great Recession

Author:
Lawrence J. Christiano, Martin Eichenbaum, and Mathias Trabandt
Publication Date:
06-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We argue that the vast bulk of movements in aggregate real economic activity during the Great Recession were due to financial frictions. We reach this conclusion by looking through the lens of an estimated New Keynesian model in which firms face moderate degrees of price rigidities, no nominal rigidities in the wages and a binding zero lower bound constraint on the nominal interest rate. Our model does a good job of accounting for the joint behavior of labor and goods markets, as well as inflation, during the Great Recession. According to the model the observed fall in total factor productivity and the rise in the cost of working capital played critical roles in accounting for the small size of the drop in inflation that occurred during the Great Recession.
Topic:
Global Recession, Financial Crisis, Economic Theory, Interest Rates, Models, and Economic Crisis
Political Geography:
Global Focus

10. Counter-Cyclical Economic Policy

Author:
The Organization for Economic Co-operation and Development
Publication Date:
05-2010
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
The effects of the recent economic crisis have stretched policy frameworks in many OECD countries close to breaking point. Recent work by the OECD has examined how policies have interacted with the economic cycle over time and during the recent crisis. The main policy lessons are as follows: • Policy-makers should take into account uncertainties about the functioning of the economy, the nature of economic shocks or the effects of policy and take their decisions accordingly. • Policy in various areas will have to build in greater safety margins and to be more prudent during upswings. • Appropriate fiscal rules can help prepare fiscal policy for the next downturn by leading to swifter consolidation during the upturn. • The monetary and financial policy framework needs to achieve a better articulation between economic and financial stability. • Financial policy needs to strengthen micro-prudential regulation, regulatory interventions may need to target emerging credit-driven bubbles and macro-prudential policies should address systemic risks. • There may be a case for monetary policy leaning against the wind, if asset prices are driven by a credit boom and financial regulation is judged to be insufficiently robust. • Changes to structural policy settings can improve the resilience of the economy to shocks and affect the degree of leverage households and firms take on.
Topic:
Economics, Fiscal Policy, Economic Stability, and Economic Crisis
Political Geography:
Global Focus