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2. Economic Diplomacy: The impact of Russia’s growing role on the Lebanese crisis
- Author:
- Nawar Samad
- Publication Date:
- 07-2021
- Content Type:
- Commentary and Analysis
- Institution:
- Future for Advanced Research and Studies (FARAS)
- Abstract:
- A Russian business delegation visited Lebanon in late June 2021 to offer support to the country by cultivating projects in the oil sector, development plans for the energy industry as well as the ports in Beirut and Tripoli. For the past two years, Lebanon, which is going through the worst economic and financial crisis in its history, and has been trying to secure international aid to survive, is now facing the attractive Russian economic bailout offer. Although such an offer is welcomed by Lebanon, the Russian initiative raises concerns across the West, and particularly in the United States, which is in control of Lebanon’s banking system and still has significant influence on the state’s politics and financial sector. The United States believes that it is not possible to dissociate this Russian offer from Moscow’s desire to expand its influence in a region, in which it already established military presence and gained access to the Eastern Mediterranean, where a conflict is underway over investment of newly-discovered gas fields.
- Topic:
- Diplomacy, Economics, Financial Crisis, and Gas
- Political Geography:
- Russia, Eurasia, Middle East, and Lebanon
3. Beyond Coronabonds: A New Constituent for Europe
- Author:
- Nicoletta Pirozzi
- Publication Date:
- 04-2020
- Content Type:
- Commentary and Analysis
- Institution:
- Istituto Affari Internazionali
- Abstract:
- Every era has its symbols. In 1984, Mitterrand and Kohl held hands on the battlefield in Verdun, coming to symbolise the importance of peace in the pursuit of European integration. Today, in times of COVID-19, the so-called “Coronabonds” could have emerged as the symbol of a new Europe, one that is ready and able to do what it takes to collectively overcome the present crisis. Yet, what some member states consider an indispensable emblem of European solidarity, namely debt mutualisation to face an unprecedented symmetric crisis brought about by COVID-19, is regarded by others as an ultimate excuse for moral hazard. As a result, Europe could end up with a politically more digestible European Fund, as proposed by Commissioners Paolo Gentiloni and Thierry Breton, designed to issue long-term bonds.[1] Or, as outlined by the Eurogroup, a Recovery Fund that is “temporary, targeted and commensurate” to the extraordinary costs of the current crisis, helping to spread them across time.
- Topic:
- Financial Crisis, Governance, Finance, Economy, and Coronavirus
- Political Geography:
- Europe and European Union
4. Assessing Israel Katz’s First Year as Foreign Minister
- Author:
- Nimrod Goren
- Publication Date:
- 02-2020
- Content Type:
- Commentary and Analysis
- Institution:
- Mitvim: The Israeli Institute for Regional Foreign Policies
- Abstract:
- In February 2019, Israel Katz was named Israel’s interim foreign minister, and three months later his appointment became permanent. This ended a period of almost four-years without a fulltime foreign minister, during which the Ministry of Foreign Affairs (MFA) significantly declined. A year into Katz’s term, an assessment can be made as to whether his appointment has strengthened the MFA and left a policy imprint. This, while taking into consideration the turmoil in Israeli politics since early 2019 and the understanding that deeper change requires a ministerial tenure longer than a year. This article sums up Katz’s first year on the job, based on media reports and information published by the MFA. It examines both intra-ministerial and policy aspects, and concludes that Katz is operating in Netanyahu’s heavy shadow, has failed to address the deep budgetary crisis faced by the MFA, and has focused on developing ties with Gulf States and combatting anti-Semitism.
- Topic:
- Government, Politics, Financial Crisis, and Benjamin Netanyahu
- Political Geography:
- Middle East, Israel, and Gulf Nations
5. The Politics of Lebanon’s Economic Collapse
- Author:
- Paul Rivlin
- Publication Date:
- 11-2019
- Content Type:
- Commentary and Analysis
- Institution:
- Moshe Dayan Center for Middle Eastern and African Studies
- Abstract:
- In the current issue of Iqtisadi, Paul Rivlin discusses the economic conditions that led to the current protest movement in Lebanon, focusing on the origins and impact of the banking crisis and how it relates to the political system.
- Topic:
- Politics, Financial Crisis, Economy, and Protests
- Political Geography:
- Middle East and Lebanon
6. Destabilizing Orders: Understanding the Consequences of Neoliberalism
- Author:
- Jenny Andersson and Olivier Godechot
- Publication Date:
- 06-2018
- Content Type:
- Commentary and Analysis
- Institution:
- Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
- Abstract:
- Throughout the long postwar period, crisis was a conjectural phenomenon and the exception in a normalcy of growth and social progress. Many key concepts of the social sciences – indeed, our understanding of democracy, embedded markets, enlightened electorates, benevolent political elites, and problem-solving progressive alliances – seem inapt for understanding today’s societal upheaval. In the wake of the financial crisis of 2008, we have witnessed the breakdown of majority alliances, the return of populism on a grand scale both in the Western world and globally, and the eruption into chaotic and sometimes violent social protests. The forces that underpinned the framework of welfare capitalism seem obsolete in the face of financial and political elites who are paradoxically both disconnected from national territory and sometimes in direct alliance with nationalist and populist movements. Politics of resentment, politics of place, and new politics of class interact in ways that we do not yet understand. Perhaps the greatest paradox of all is that neoliberalism has spawned authoritarianism. At the same time, these processes are not at all new, but must be put in the context of the socioeconomic and cultural cleavages produced by the shift to neoliberalism since the 1970s. The paper presents arguments by leading scholars in economic history, economic sociology, and political economy in brief thinknotes that were prepared for the MaxPo Fifth-Anniversary Conference on January 12 and 13, 2018, in Paris.
- Topic:
- Economics, International Political Economy, Financial Crisis, Inequality, Neoliberalism, and Free Market
- Political Geography:
- Global Focus
7. The Greek Euro Tragedy
- Author:
- John Ryan
- Publication Date:
- 11-2016
- Content Type:
- Commentary and Analysis
- Institution:
- LSE IDEAS
- Abstract:
- On 4 February 2015, the European Central Bank (ECB) unexpectedly and suddenly cancelled acceptance of Greek bonds as collateral for liquidity funding unless Greece obeyed the Troika agreement. The ECB’s irresponsible and incompetent actions call into question their respect for the Greek government’s attempts to resolve its debt crisis in a sustainable way. The ECB may or may not have good reasons to cut off Greece, depending on your point of view, but it is clear that such a move would be political. A central bank that is supposed to be the lender of last resort and guardian of financial stability would be taking a deliberate and calculated decision to undermine the Greek banking system. The ECB is now seen in some quarters as arrogant, unaccountable and authoritarian.1 This Strategic Update discusses the most recent problems for the Eurozone, namely the Greek crisis and the European Central Bank’s (ECB) lack of democratic accountability which has contributed to considerable difficulties for the stability of the Eurozone.
- Topic:
- International Trade and Finance and Financial Crisis
- Political Geography:
- Greece
8. Realized Bank Risk during the Great Recession
- Author:
- Yener Altunbas, Simone Manganelli, and David Marques-Ibanez
- Publication Date:
- 08-2015
- Content Type:
- Commentary and Analysis
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- In the years preceding the 2007-2009 financial crisis, forward-looking indicators of bank risk concentrated and suggested unusually low expectations of bank default. We assess whether the ex-ante (i.e. prior to the crisis) cross-sectional variability in bank characteristics is related to the ex-post (i.e. during the crisis) materialization of bank risk. Our tailor-made dataset crucially accounts for the different dimensions of realized bank risk including access to central bank liquidity during the crisis. We consistently find that less reliance on deposit funding, more aggressive credit growth, larger size and leverage were associated with larger levels of realized risk. The impact of these characteristics is particularly relevant for capturing the systemic dimensions of bank risk and tends to become stronger for the tail of the riskier banks. The majority of these characteristics also predicted bank risk as materialized before the financial crisis.
- Topic:
- Global Recession, Financial Crisis, Risk, and Banking
- Political Geography:
- North America and United States of America
9. Bank Ownership, Lending, and Local Economic Performance During the 2008-2010 Financial Crisis
- Author:
- Nicholas Coleman and Leo Feler
- Publication Date:
- 03-2014
- Content Type:
- Commentary and Analysis
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- While the finance literature often equates government banks with political capture and capital misallocation, these banks can help mitigate financial shocks. This paper examines the role of Brazil's government banks in preventing a recession during the 2008-2010 financial crisis. Government banks in Brazil provided more credit, which offset declines in lending by private banks. Areas in Brazil with a high share of government banks experienced increases in lending, production, and employment during the crisis compared to areas with a low share of these banks. We find no evidence that lending was politically targeted or that it caused productivity to decline in the short-run.
- Topic:
- Economics, Financial Crisis, Governance, Local, Lending, and Banking
- Political Geography:
- Brazil and South America
10. 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
11. Bank Interventions and Options-based Systemic Risk: Evidence from the Global and Euro-area Crisis
- Author:
- Juan M. Londono and Mary Tian
- Publication Date:
- 09-2014
- Content Type:
- Commentary and Analysis
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- Using a novel dataset on central bank interventions to financial institutions, we examine the impact of capital injection announcements on systemic risk for the banking sector in the U.S. and the euro area between 2008 and 2013. We propose a new measure of options-based systemic risk called downside correlation risk premium (DCRP), which quantifies the compensation investors demand for being exposed to the risk of large correlated drops in bank stock prices. DCRP is calculated using options that provide a hedge against large drops in the price of a bank index and its individual components. We find that, irrespective of their characteristics, intervention announcements significantly reduce DCRP in the U.S. while for the euro area, interventions were largely unsuccessful at reducing DCRP.
- Topic:
- Financial Crisis, Institutions, Risk, and Banking
- Political Geography:
- Europe, North America, and United States of America
12. Banks, Capital Flows and Financial Crises
- Author:
- Ozge Akinci and Albert Queralto
- Publication Date:
- 10-2014
- Content Type:
- Commentary and Analysis
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- This paper proposes a macroeconomic model with financial intermediaries (banks), in which banks face occasionally binding leverage constraints and may endogenously affect the strength of their balance sheets by issuing new equity. The model can account for occasional financial crises as a result of the nonlinearity induced by the constraint. Banks' precautionary equity issuance makes financial crises infrequent events occurring along with "regular" business cycle fluctuations. We show that an episode of capital infl ows and rapid credit expansion, triggered by low country interest rates, leads banks to endogenously decrease the rate of equity issuance, contributing to an increase in the likelihood of a crisis. Macroprudential policies directed at strengthening banks' balance sheets, such as capital requirements, are shown to lower the probability of financial crises and to enhance welfare.
- Topic:
- Financial Crisis, Capital Flows, Banks, Economic Theory, and Interest Rates
- Political Geography:
- Global Focus
13. The Replacement of Safe Assets: Evidence from the U.S. Bond Portfolio
- Author:
- Carol C. Bertaut, Alexandra Tabova, and Vivian Wong
- Publication Date:
- 11-2014
- Content Type:
- Commentary and Analysis
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- The expansion in financial sector "safe" assets, largely in the form of structured products from the U.S. and the Caribbean, in the lead-up to the global financial crisis has by now been fairly well documented. Using a unique dataset derived from security-level data on U.S. portfolio holdings of foreign securities, we show that since the crisis, it is mostly the foreign financial sector that appears to have met U.S. demand for safe and liquid investment assets by expanding its supply of debt securities. We also find a strong negative correlation between the foreign share of the U.S. financial bond portfolio and measures of U.S. safe assets availability: providing evidence on the importance of foreign-issued financial sector debt as a substitute when U.S. issued "safe" assets are scarce. Furthermore, although U.S. investors continue to tap foreign financial markets for "safe" assets, we show that the type of foreign financial debt that fills this portfolio niche post-crisis is quite different than pre-crisis. Post-crisis, we find that U.S. investors have replaced offshore-issued structured securities with high-grade U.S. dollar-denominated financial debt issued from a small group of OECD countries (most notably Australia and Canada). Lastly, these developments have led to a decline in home bias in the U.S. financial bond portfolio that we are able to document for the first time.
- Topic:
- Foreign Exchange, Financial Crisis, Investment, Fiscal Policy, and Bonds
- Political Geography:
- Caribbean, North America, and United States of America
14. Cyclically Adjusted Current Account Balances
- Author:
- Jane Haltmaier
- Publication Date:
- 12-2014
- Content Type:
- Commentary and Analysis
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- The Great Financial Crisis coincided with a sizable reduction in global external imbalances, defined as the absolute value of the sum of individual country current account surpluses and deficits relative to global GDP. Although current account balances should not respond to a downturn that is uniform across countries, one that hits countries with current account deficits harder than those with surpluses might result in a decline in the global balance. This paper quantifies the cyclical portion of the current account balance for 35 countries using estimates of the severity of the cycle in each country relative to that of its trading partners in conjunction with three estimates of the sensitivity of the current account balance to changes in the output gap. Two of the estimates are derived from equations linking trade to income and the third is derived from the relationship between changes in current account balances and changes in output gap differentials. The main result is that the bulk of the reduction in the global current account imbalance since 2006 appears to have been structural. Cyclical forces are estimated to account for between 10 and 30 percent of the decline. In the aggregate, the cyclical effect is estimated to be currently holding down the global current account balance by about 1/2 percentage point. However, the size of the cyclical effect is more substantial for some countries. Both surplus and deficit countries have contributed to the decline in the absolute value of the global current account imbalance, but the contribution of the deficit countries is about twice as large as that of the surplus countries. Changes in oil prices have had largely offsetting effects on the global current account balance, but changes in real exchange rates in recent years have contributed to the reduction.
- Topic:
- Economics, Energy Policy, Oil, Natural Resources, Financial Crisis, GDP, Exchange Rate Policy, and Trade
- Political Geography:
- Global Focus