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511. What lessons from the 1930s?

Author:
Daniel Gros and Cinzia Alcidi
Publication Date:
05-2009
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
This paper explores three areas in which the experience of the Great Depression might be relevant today: monetary policy, fiscal policy and the systemic stability of the banking system. We confirm the consensus on monetary policy: deflation must be avoided. With regard to fiscal policy, the picture is less clear. We cannot confirm a widespread opinion according to which fiscal policy did not work because it was not tried. We find that fiscal policy went to the limit of what was possible within the confines of sustainability, as they existed then. Our investigation of the US banking system shows a surprising resilience of the sector: commercial banking operations (deposit-taking and lending) remained profitable even during the worst years. This suggests one policy conclusion: At present the authorities in both the US and Europe have little choice but to make up for the losses on 'legacy' assets and wait for banks to earn back their capital. But to prevent future crises of this type, one should make sure that losses from the investment banking arms cannot impair commercial banking operations. At least a partial separation of commercial and investment banking thus seems justified by the greater stability of commercial banking operations.
Topic:
Economics, Markets, and Financial Crisis
Political Geography:
United States and Europe

512. The Effect of the Financial Crisis on Systemic Trust

Author:
Felix Roth
Publication Date:
07-2009
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
The financial crisis had a significant impact on the levels of trust that citizens place in the system and its institutions. Recent data from Eurobarometer show a significant fall in confidence on the part of European citizens in the EU's institutions. For the first time since its creation, a majority of European citizens no longer trust the European Central Bank. However, confidence levels in national governments have actually risen, supporting a contrasting trend between confidence levels in European and national institutions. This decrease in confidence towards the ECB is flanked in the case of Germany by strong anti-capitalist sentiments and a sharp decline in support for the social market economy.
Topic:
Economics, Markets, and Financial Crisis
Political Geography:
Europe and Germany

513. Effects of the Financial Crisis on The U.S.-China Economic Relationship

Author:
Eswar S. Prasad
Publication Date:
08-2009
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The U.S. and China are two of the dominant economies in the world today and the nature of their relationship has far-reaching implications for the smooth functioning of the global trade and financial systems. These two economies are becoming increasingly integrated with each other through the flows of goods, financial capital, and people. These rising linkages of course now stretch far beyond just trade and finance, to a variety of geopolitical and global security issues. Getting this relationship right is therefore of considerable importance.
Topic:
Financial Crisis
Political Geography:
United States and China

514. Mastering Global Financial Crises: a German Perspective

Author:
Jörg Asmussen
Publication Date:
07-2009
Content Type:
Journal Article
Journal:
The Washington Quarterly
Institution:
Center for Strategic and International Studies
Abstract:
The world economy has experienced a downturn of historical dimensions since the onset of 2009. Almost everywhere, production has declined rapidly, world trade has virtually collapsed, and the recession has spread to all major economic regions. The global financial crisis is the culmination of an exceptional boom in credit growth and leverage in the financial system. Low interest rates, abundant liquidity, and low volatility prompted investors to search for higher yields without an adequate appreciation of related risks. Financial institutions developed new structures and innovative risky instruments to meet investors' demand for higher yields. Investors in turn, overly optimistic about continued rises in asset prices, did not look closely enough into the nature of the assets they bought. They mostly relied on the analysis of credit rating agencies which were, in some cases, also selling advice on how to develop the rated products. This failure of market discipline played a considerable role in the crisis.
Topic:
Financial Crisis
Political Geography:
Germany

515. The Human Cost of Economic Crises

Author:
Marcus Alexander, Matthew Harding, and Carlos Lamarche
Publication Date:
04-2009
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
Policy makers rely on a mix of government spending and tax cuts to address the imbalances in the economy during an economic crisis, by promoting price stability and renewed economic growth. However, little discussion appears to focus explicitly on the costs of economic crises in terms of human lives, especially the lives of the most vulnerable members of society, infants. This paper quantifies the effect that economic crises, periods of prolonged economic recession, have on infant mortality. Moreover, we investigate whether different levels of public spending on health across advanced industrialized democracies can mitigate the impact of crises on infant mortality. We find that economic crises are extremely costly and lead to a more than proportional increase in infant mortality in the short-run. Substantial public spending on health is required in order to limit their impact.
Topic:
Economics, Health, Monetary Policy, and Financial Crisis

516. EIU Quarterly Global Outlook Webinar

Publication Date:
09-2009
Content Type:
Working Paper
Abstract:
No abstract is available.
Topic:
Economics, Markets, and Financial Crisis

517. Reinforcing Treasury's Strategic Roles in International Affairs and National Security

Author:
Jeremiah S. Pam
Publication Date:
09-2009
Content Type:
Working Paper
Institution:
United States Institute of Peace
Abstract:
At this time of the U.S. Treasury's Department's extraordinary prominence in domestic affairs, it is possible to overlook the critical functions that the Treasury performs in U.S. international policy. This would be a significant oversight at any time, as Treasury has long made more international contributions, of greater importance to U.S. policy, than has often been widely understood. It is even more of an oversight in the post-9/11 international environment, which has presented new challenges that have sorely tested many of the United States' more well-known foreign policy and national security institutions.
Topic:
Security, Economics, International Affairs, and Financial Crisis
Political Geography:
United States

518. Getting Off Lightly? The Impact of the International Financial Crisis on the Middle East and North Africa

Author:
Juliane Brach and Markus Loewe
Publication Date:
08-2009
Content Type:
Working Paper
Institution:
German Institute of Global and Area Studies
Abstract:
The international financial crisis has hit the Middle East and North Africa (MENA), like other developing regions, unexpectedly, during a long phase of above-average growth. In contrast to other parts of the world, however, most MENA developing countries will able to get off lightly if the crisis does not last for too long. In Turkey and Israel, the region's more industrialized countries, different initial conditions apply and the situation is not comparable to the Arab MENA countries.
Topic:
Development, Economics, Emerging Markets, Markets, and Financial Crisis
Political Geography:
Middle East, Arabia, and North Africa

519. China's Employment Crisis – A Stimulus for Policy Change?

Author:
Günter Schucher
Publication Date:
09-2009
Content Type:
Journal Article
Institution:
German Institute of Global and Area Studies
Abstract:
In the face of severe job problems, China's government has adopted a huge stimulus package in a bid to achieve eight per cent economic growth, which is said to guarantee at least enough jobs for the new entrants to the labour market. The real situation, however, will be much grimmer than statistics indicate. Unregistered groups like unemployed rural migrants, job-searching college graduates, laid-off workers and others together with the officially registered unemployed and the new market entrants could add up to 42 million altogether, while even the most optimistic estimates say only around 15 million new jobs could be created in 2009. Nevertheless, the stimulus package demonstrates an at least temporary shift in economic policy from capital-intensive to labour-intensive growth. Additionally, the new initiatives to boost social-security spending could help to address the grievances of the most vulnerable groups in the labour market. The Chinese government's reaction to the emerging employment crisis once again demonstrates the often underestimated adaptability of China's leadership.
Topic:
Financial Crisis
Political Geography:
China

520. Mass poverty in Asia and the GFC

Author:
Peter McCawley
Publication Date:
06-2009
Content Type:
Policy Brief
Institution:
Lowy Institute for International Policy
Abstract:
What is the problem? In addition to the current Global Financial Crisis (GFC), there is a second global crisis: long-term mass poverty in the third world. While the rich world worries about a repeat of the Great Depression, today more than a billion people in Asia live in conditions of bitter poverty which are much worse than those of the 1930s. As a result of the GFC, poverty in developing Asia is now likely to increase.
Topic:
Development, Economics, Poverty, and Financial Crisis
Political Geography:
Asia