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391. The International Financial Crisis: Eight Lessons for and from Latin America

Author:
Liliana Rojas-Suarez
Publication Date:
01-2010
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The international financial crisis of 2008–09 exposed the strengths and weaknesses of the current paradigm of development in Latin America, a paradigm based on liberalized capital accounts and significantly improved macroeconomic conditions. This paper presents lessons derived from the crisis, not only for the region itself, but also for other developing countries that might seek economic growth in the context of greater integration to the international capital markets. Some of the lessons are not new but have been reinforced by the crisis, such as Latin America's imperative need for export diversification (not only in products but in partners). Other lessons break with longstanding myths about the region, such as its inability to undertake counter-cyclical policies—at least on the monetary side. Yet other lessons reflect new developments in the current growth paradigm, such as a renewed assessment of (1) the relative roles of foreign and domestic banks in shielding the financial system against external shocks and (2) the potential costs of adopting blanket international financial regulations that do not account for a country's degree of development. Taken together, the lessons in this paper bring a new sense of optimism for growth in Latin America.
Topic:
Economics, International Trade and Finance, and Financial Crisis
Political Geography:
Latin America

392. Is the recovery sustainable in the US and Europe?

Publication Date:
02-2010
Content Type:
Working Paper
Institution:
Oxford Economics
Abstract:
Following the worst recession since the 1930s, the US, UK and Eurozone economies have all now returned to positive growth. With the boost from policy stimulus and the inventory cycle peaking, however, this raises questions about the sustainability of the current rebound. The analysis presented here suggests that the recoveries in both the US and Europe will be relatively muted compared to recent historical experience. The US is likely to be the growth leader, reflecting the more dynamic nature of its economy and financial sector. A key uncertainty relates to how labour markets will perform during the recovery phase. To date, the rise in US unemployment been particularly severe when compared to the experience of Europe. In light of the sharp falls in European productivity, we expect employment gains in Europe to be more muted in the recovery phase than in the US. The performance of residential real estate markets also remains important. Home prices in the US are now close to fair value by most metrics, suggesting that the correction in prices is likely to be bottoming out. In Europe, only Spain and Ireland appear to be in the midst of substantial housing market corrections. Commercial real estate markets are also facing ongoing corrections in many countries. While conditions in the US and Eurozone may deteriorate further, commercial property values appear to be stabilising in the UK following earlier sharp declines. The ability of the banking sector to finance the economic recoveries in the US and Europe remains a key risk to the growth outlook. As the process of absorbing credit losses and rebuilding capital is likely to be protracted, the normalisation of lending standards is likely to take longer than following recent recessions. This is a particular concern for the Eurozone, where bank funding is more important for companies. Whether domestic demand in the US and Europe recovers will also depend on whether private sector deleveraging has further to run. The destruction of household net wealth in the US suggests that the personal savings rate has further to rise, whereas there no longer appears to be a pressing need for households in the UK and Eurozone to consolidate their balance sheets. In contrast, non-financial corporations in the US are in a stronger financial position than their European peers, having not increased debt levels as rapidly during the credit boom. Risks around public finances have received the most attention in recent weeks. In particular, the adjustments underway in Greece pose a risk of potential contagion from sovereign credit risk that could threaten growth on both sides of the Atlantic.
Topic:
Economics, Markets, and Financial Crisis
Political Geography:
United States, United Kingdom, and Europe

393. The response to the global crisis and investment protection: evidence

Author:
Kathryn Gordon and Joachim Pohl
Publication Date:
06-2010
Content Type:
Policy Brief
Institution:
Columbia Center on Sustainable Investment
Abstract:
In March 2009, Columbia FDI Perspectives carried an early analysis of investment policies in response to the financial crisis that began in early 2008. At that time, the authors, Anne van Aaken and Jürgen Kuntz, found “clear evidence of widespread discrimination directed at foreign actors” in the emergency response to the crisis.
Topic:
Economics, Global Recession, Monetary Policy, Foreign Direct Investment, and Financial Crisis
Political Geography:
Colombia

394. Foreign direct investment and U.S. national security: CFIUS under the Obama Administration

Author:
Mark E. Plotkin and David N. Fagan
Publication Date:
06-2010
Content Type:
Policy Brief
Institution:
Columbia Center on Sustainable Investment
Abstract:
There was considerable public scrutiny of the Obama Administration's performance in its inaugural year, but comparatively little focus on one of the Administration's key processes governing the flow of investment into the United States — namely, the Committee on Foreign Investment in the United States (CFIUS). Yet, this is a frequent question we receive from foreign investors -- has the change in the administration affected CFIUS?
Topic:
Economics, International Trade and Finance, Monetary Policy, Foreign Direct Investment, and Financial Crisis
Political Geography:
United States

395. Short Sales Bans: Shooting the Messenger?

Author:
Laurence Copeland
Publication Date:
09-2010
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
In response to the recent financial crisis, many governments chose to ban or restrict short sales, hoping to mitigate the impact of the stock market downturn. Stock markets function as a continuous election, held to determine the allocation of resources with buyers voting for and sellers voting against investment in particular stocks. Banning short selling is akin to disenfranchising the "no" voter, thereby creating a distortion in the resource allocation process. Ban-induced price distortions damage the integrity of stock prices among investors and potentially cause stocks to expand beyond what is optimal for the firms and the economy.
Topic:
Economics, Markets, Global Recession, and Financial Crisis
Political Geography:
Washington

396. Interdependency Theory: China, India and the West

Author:
Simon Tay
Publication Date:
09-2010
Content Type:
Journal Article
Journal:
Foreign Affairs
Institution:
Council on Foreign Relations
Abstract:
No abstract is available.
Topic:
Development, Economics, Government, and Financial Crisis
Political Geography:
China and India

397. Role of the IMF in the Global Financial Crisis

Author:
Miranda Xafa
Publication Date:
09-2010
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
More than two years on, the impact of the financial crisis that erupted in August 2007 is still being felt as the global economy emerges from the Great Recession. The crisis intensified dramatically after the bankruptcy of Lehman and the rescue of insurance giant AIG in September 2008, which narrowly avoided a near-simultaneous failure of multiple counterparties. The International Monetary Fund's early forecast of the severity of the resulting economic downturn (IMF 2008a) helped mobilize concerted official action to address quickly and forcefully these extraordinary economic and financial events by providing fiscal stimulus to sustain growth, as well as capital injections and guarantees to ease the credit crunch. Following the emergency summit of G20 leaders in Washington in November 2008, support packages for banks were put together in a hurry in the United States, Europe, and elsewhere to prevent the dis- orderly failure of systemically important institutions and to restore confidence in the financial system.
Topic:
Financial Crisis
Political Geography:
United States and Middle East

398. Jimmy Stewart Is Dead: Ending the World's Ongoing Financial Plague with Limited Purpose Banking

Author:
Gerald P. O'Driscoll Jr.
Publication Date:
09-2010
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Chapter 1 of the book is titled “It's a Horrible Mess,” and in it Laurence Kotlikoff, a professor of economics at Boston University, reminds the reader of the breadth, depth, and horror of the global financial crisis. It is a cure for the dispassionate observer of events, an indictment that would send all but those with ice water in their veins to sign up for the Tea Party Express. The book is a particularly well-written account of the crisis that begins in housing finance, spreads throughout the financial system, and then throughout the real economy. The crisis hit in tsunami-like waves beginning in 2007 and continued into 2009.
Topic:
Financial Crisis

399. What reforms for the credit rating industry? A European perspective

Author:
Karel Lannoo
Publication Date:
10-2010
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies
Abstract:
Credit rating agencies (CRAs) continue to find themselves in the eye of the storm. Despite having singled out the industry early on in the financial crisis as needing more regulation, policy-makers seem not to be reassured by the measures that have been adopted in the meantime, and want to go further. Faced with a rapid downgrading in ratings in the context of the sovereign debt crisis, European Commissioner Michel Barnier raised the possibility last May of creating a new EU-level rating agency that would specialise in sovereign debt.
Topic:
Global Recession, Monetary Policy, and Financial Crisis
Political Geography:
Europe

400. Briefly Noted [Full Text]

Publication Date:
06-2010
Content Type:
Journal Article
Institution:
Carnegie Council
Abstract:
This section contains a round-up of recent notable books in the field of international affairs.
Topic:
War and Financial Crisis