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212. Sovereign Bankruptcy in the European Union in the Comparative Perspective
- Author:
- Leszek Balcerowicz
- Publication Date:
- 12-2010
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper distinguishes four alternative sovereign debt resolution mechanisms: pure market solutions, modified market solutions, crisis lending by the IMF and other institutions, and the proposed Sovereign Debt Restructuring Mechanism (SDRM). It is hard to find—at the general level of analysis—the unique advantages of SDRM. The assessment of the European Stabilization Mechanism will ultimately depend on its operation, especially whether it will be a tool of subsidizing countries in debt distress or an instrument of fiscal crisis lending. The present fiscal problems in the eurozone are due to the erosion of fiscal discipline and not to the lack of strong compensatory transfers within the eurozone. The right model to look at the conditions for the stability of the eurozone is not a single state but the gold standard–type system, a system of sovereign states with a (de facto) single currency. Based on this analogy and considering modern developments, three types of measures are needed to safeguard the stability of the eurozone: (1) measures that would reduce the procyclicality of the macroeconomic policies and of the economy; (2) reforms that would help the eurozone economies grow out of increased public debt; and (3) steps to increase the flexibility of the economy so that it can deal with the future shocks in a better way.
- Topic:
- Debt, Economics, Markets, Monetary Policy, and Financial Crisis
- Political Geography:
- Europe
213. The NBRIC Revolution and International Relations?
- Author:
- Dr Graeme P. Herd and Mr Dale A. Till
- Publication Date:
- 12-2010
- Content Type:
- Policy Brief
- Institution:
- The Geneva Centre for Security Policy
- Abstract:
- We live in the “Anthropocene” era – the Age of Humans: human activity impacts earth's at-mosphere, its climate system, and is the driver of one of the biggest mass extinctions in history.The rapid advancement and application of NBRIC technologies (Nanotechnology, Biotechnology, Robotics, and Information and Communications technology) both enable and exacerbate the global impact of human activity. The rise in speed and fall in the cost of computational analysis and the force multiplying convergence of NBRIC clusters have led revolutions in these inter-enabling technologies. Such technologies are located in biological systems where biotechnology and genetics, post-genomics, and epigenetics try and bridge the gulf between the genome and the or-ganism, and material systems, where advances in nanotechnology, robotics and information and communications technologies are ground-breaking.
- Topic:
- International Relations, Debt, Genocide, Politics, Science and Technology, and Power Politics
214. A Theory of Capital Rationing
- Author:
- Jan Toporowski
- Publication Date:
- 09-2010
- Content Type:
- Working Paper
- Institution:
- School of Oriental and African Studies - University of London
- Abstract:
- This paper revisits some of the issues originally put forward by the author as the theory of capital market inflation, in the book The End of Finance (Toporowski 2000). The paper makes much clearer the key assumptions and relationships between the operations of the capital market dominated by institutional investors, and the balance sheets of companies. In this way, it presents a theory of how macroeconomic dynamics may be affected by disequilibrium in the capital market. The first part of the paper examines the demand for new equity issues by institutional investors, namely insurance companies and pension funds. In the second part of the paper it is argued that the tendency of pension funds to mature may be a factor in forcing companies into debt and thus discouraging their investment and restricting their cash flow. The tendency towards forced indebtedness may be reinforced by an inelastic demand for capital by banks. The third part of the paper argues that the inelastic supply of capital in the capital market gives rise to processes of capital market inflation or deflation. The first of these may make banks more fragile. The second may contribute to deflationary processes in the macroeconomy. A fourth section argues that further instability is added by international capital market integration.
- Topic:
- Debt, Markets, Banks, and Investment
- Political Geography:
- Global Focus
215. Why Fiscal Stimulus Is Unlikely to Work
- Author:
- Kevin A. Hassett
- Publication Date:
- 03-2009
- Content Type:
- Working Paper
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- This paper reviews the empirical literature on countercyclical policy. It finds that three types of countercyclical policies have been studied in the literature: built in stabilizers, temporary policy changes, and more permanent policy changes. The literature is decidedly mixed on the effectiveness of temporary changes, but more hopeful concerning the other two.
- Topic:
- Debt, Economics, Markets, and Political Economy
- Political Geography:
- United States
216. The Crisis and Fix Cycle
- Author:
- John H. Makin
- Publication Date:
- 02-2009
- Content Type:
- Policy Brief
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- The global financial and economic crisis that emerged in August 2007 has entered a dismaying fourth phase. The January 17–18, 2009, weekend edition of the Financial Times, which has been a major chronicler of the crisis and its many aspects, laid out a frightening timeline of an accelerating and intensifying oscillatory cycle of crisis and failed policy response that started just fifteen months ago. Each phase begins with a shock and ends with a seemingly decisive policy measure meant to contain or “fix” the crisis. Each phase is shorter than the previous one and culminates in a much larger policy response. Throughout the crisis, the losses of financial institutions have steadily grown at an accelerating pace as the underlying conditions in the financial sector and, since September 2008, in the underlying global economy deteriorate more rapidly. Such a disturbing pattern must be truncated by a large, coordinated global policy response to arrest the accelerating erosion of the market capitalization of multinational banks and insurance companies that has resulted.
- Topic:
- Debt, Economics, Markets, and Political Economy
- Political Geography:
- United States
217. US Interests and the International Monetary Fund
- Author:
- C. Randall Henning
- Publication Date:
- 06-2009
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The United States Congress is now considering whether to raise US commitments to the International Monetary Fund (IMF). A positive decision would ratify President Obama's pledge in early April, taken with the other leaders of the G-20, to bolster the IMF as part of their cooperative response to the global economic crisis. The package of measures advanced by the G-20 leaders would triple the resources available to the Fund to $750 billion and would greatly reinforce its role in the international financial system. However, the IMF remains a controversial institution and congressional support cannot be taken for granted.
- Topic:
- Debt, Monetary Policy, and Financial Crisis
- Political Geography:
- United States
218. Does Openness To International Financial Flows Raise Productivity Growth?
- Author:
- Marco E. Terrones, Eswar Prasad, and Ayhan Kose
- Publication Date:
- 01-2009
- Content Type:
- Working Paper
- Institution:
- The Brookings Institution
- Abstract:
- Economic theory has identified a number of channels through which openness to international financial flows could raise productivity growth. However, while there is a vast empirical literature analyzing the impact of financial openness on output growth, far less attention has been paid to its effects on productivity growth. This paper provides a comprehensive analysis of the relationship between financial openness and total factor productivity (TFP) growth using an extensive dataset that includes various measures of productivity and financial openness for a large sample of countries. We find that de jure capital account openness has a robust positive effect on TFP growth. The effect of de facto financial integration on TFP growth is less clear, but this masks an important and novel result. We find strong evidence that FDI and portfolio equity liabilities boost TFP growth while external debt is actually negatively correlated with TFP growth. The negative relationship between external debt liabilities and TFP growth is attenuated in economies with higher levels of financial development and better institutions.
- Topic:
- Debt, Development, Economics, and Foreign Direct Investment
219. The Future of Foreign Assistance Amid Global Economic and Financial Crisis
- Author:
- Laurie A. Garrett
- Publication Date:
- 01-2009
- Content Type:
- Working Paper
- Institution:
- Council on Foreign Relations
- Abstract:
- Though the United States of America faces its toughest budgetary and economic challenges since the Great Depression, it cannot afford to eliminate, or even reduce, its foreign assistance spending. For clear reasons of political influence, national security, global stability, and humanitarian concern the United States must, at a minimum, stay the course in its commitments to global health and development, as well as basic humanitarian relief. The Bush administration sought not only to increase some aspects of foreign assistance, targeting key countries (Iraq and Afghanistan) and specific health targets, such as the President's Emergency Plan for AIDS Relief and the President's Malaria Initiative, but also executed an array of programmatic and structural changes in U.S. aid efforts. By 2008, it was obvious to most participants and observers that too many agencies were engaged in foreign assistance, and that programs lacked coherence and strategy. Well before the financial crisis of fall 20 08, there was a strong bipartisan call for foreign assistance reform, allowing greater efficiency and credibility to U.S. efforts, enhancing engagement in multilateral institutions and programs, and improving institutional relations between U.S. agencies and their partners, including nongovernmental organizations (NGOs), recipient governments, corporate and business sector stakeholders, faith-based organizations (FBOs), academic-based implementers and researchers, foundations and private donors, United Nations (UN) agencies, and other donor nations.
- Topic:
- Foreign Policy, Debt, Development, Economics, Health, and United Nations
- Political Geography:
- United States
220. China's $1.7 Trillion Bet: China's External Portfolio and Dollar Reserves
- Author:
- Brad W. Setser and Arpana Pandey
- Publication Date:
- 01-2009
- Content Type:
- Working Paper
- Institution:
- Council on Foreign Relations
- Abstract:
- China reported $1.95 trillion in foreign exchange reserves at the end of 2008. This is by far the largest stockpile of foreign exchange in the world: China holds roughly two times more reserves than Japan, and four times more than either Russia or Saudi Arabia. Moreover, China's true foreign port- folio exceeds its disclosed foreign exchange reserves. At the end of December, the State Administration of Foreign Exchange (SAFE)—part of the People's Bank of China (PBoC) managed close to $2.1 trillion: $1.95 trillion in formal reserves and between $108 and $158 billion in “other foreign assets.” China's state banks and the China Investment Corporation (CIC), China's sovereign wealth fund, together manage another $250 billion or so. This puts China's total holdings of foreign assets at over $2.3 trillion. That is over 50 percent of China's gross domestic product (GDP), or roughly $2,000 per Chinese inhabitant.
- Topic:
- International Relations, Debt, Economics, Emerging Markets, and International Trade and Finance
- Political Geography:
- Russia, United States, China, Israel, Asia, and Saudi Arabia