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Begin New Search Topic Financial Crisis Content Type Policy Brief

1. Boom-bust Cycles Revisited: The Role of Credit Supply

Author:
Hyo Sang Kim, Sangyup Choi, and Yuri Kim
Publication Date:
02-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This study investigates the impacts of credit supply on economic growth and financial crisis. Excess credit supply can make the economy and financial markets more vulnerable. While credit supply can drive economic growth by reallocating resources, it can also make the economy and financial markets more fragile. Asset prices sharply fall when deleveraging occurs in the case of a negative shock to the financial or real sector in a system where credit is excessively supplied. Furthermore, economic activity might be substantially reduced, extending the length and breadth of the recession.
Topic:
Markets, Financial Crisis, Economy, Economic Growth, and Credit
Political Geography:
Global Focus

2. Regional Financial Cooperation in East Asia from a New Perspective

Author:
Sungbae An and Subin Kim
Publication Date:
12-2021
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
Following the Asian financial crisis of 1998, there was a need to improve regional financial cooperation, including liquidity support. The Chiang Mai Initiative Multilateralization (hereinafter, CMIM) and the Asian Bond Market Initiative (hereafter, ABMI) are two of the outcomes, but it is difficult to find countries that are actively using these mechanisms. Against this backdrop, we will first examine the limitations of existing systems and propose ways to overcome those limitations, as well as new ways to strengthen East Asian financial cooperation. We suggest three ways to strengthen financial coopera-tion in East Asia from a new perspective: 1) monetary cooperation through Central Bank Digital Currency (CBDC) 2) establishment of development financial institution in Northeast Asia 3) financial cooperation with Central Asia and Mongolia. Of course, more precise planning is required to implement these alternatives, and it is also recognized that the topics covered in this study represent only a subset of regional financial and monetary cooperation. However, by overcoming the limitations thus far, it is hoped that it can be a contribution that provides at least a glimmer of thought, which can hopefully become more concrete in future studies.
Topic:
Development, Regional Cooperation, Monetary Policy, Financial Crisis, and Finance
Political Geography:
Central Asia and East Asia

3. China’s FDI in Europe and Europe’s Policy Response

Author:
Pyoung Seob Yang, Cheol-Won Lee, Suyeob Na, Taehyn Oh, Young Sun Kim, Hyung Jun Yoon, and Yoo-Duk Ga
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
China’s investment in the European Union (EU) increased significantly during the European financial crisis, but has been on the decline in recent years. The surge of Chinese investment has raised concerns and demands for analysis on the negative effects it could have on the EU companies and industries. In this context, the present study aims to analyze the main characteristics of Chinese investment and M&A in Europe, major policy issues between the two sides, the EU’s policy responses, and prospects of Chinese future investment in Eu-rope, going on to draw important lessons for Korea. To summarize the main characteristics of China's investment in Europe, the study found that the EU's share of China's overseas direct investment has continued to increase until recently. Second, investment in the Central and Eastern European Countries (CEECs) is gradually increasing, although it is still insignificant compared to the top five destinations in the EU: Netherlands, Sweden, Germany, Luxembourg and France. Third, China's investment in the EU is being made in pursuit of innovation in manufacturing and to acquire high-tech technologies. When it comes to China's M&A in Europe, the study found that the proportion of indirect China's M&As (via third countries (e.g. Hong Kong) or Chinese subsidiaries already established in Europe) was relatively higher than direct ones. Empirical factor analysis of investment also shows that China's investment in the EU is strongly motivated by the pursuit of strategic assets. Other factors such as institutional-level and regulatory variables are found to have no significant impact, or have an effect contrary to expectations. This suggests that China's investment in the EU is based on the Chinese government's growth strategy, and accompanies an element of national capitalism Today, It is highly expected that the COVID-19 pandemic will have a reorganizing effect on the global value chain (GVC) and Foreign investment regulation in the high-tech sector motivated by national security is emerging as a global issue as the US and the EU are tightening their control. As Korean companies are not free from the risk of falling under such regulations, a thorough and careful response is required. And for the Korean government, it is necessary to prepare legal and institutional measures regulating foreign investment in reference to the US and the EU.
Topic:
Foreign Direct Investment, Financial Crisis, European Union, Economy, Economic Growth, Global Value Chains, and COVID-19
Political Geography:
China, Europe, Asia, Korea, and United States of America

4. Fiscal resiliency in a deeply uncertain world: The role of semiautonomous discretion

Author:
Peter R. Orszag, Robert E. Rubin, and Joseph E. Stiglitz
Publication Date:
01-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Orszag, Rubin, and Stiglitz outline a new fiscal framework that they argue would better equip policymakers to face deep uncertainties about future interest rates (which, they say, may not remain low forever), hard-to-predict global shocks, and climate risks. They reject fiscal anchors—simple limits on deficits or debt as a share of GDP that governments adopt to check their spending and borrowing—that have historically guided fiscal policy and believe any attempts to modify such targets for the current period of low interest rates are likely to fail. Instead they propose making the budget respond more automatically to economic distress (through stronger automatic stabilizers) and to long-term fiscal pressures (e.g., embedding adjustment mechanisms in health care and pension programs), as well as creating an infrastructure program and extending debt maturities to insure against interest rate changes. Such a "streamlined dashboard" would then allow policymakers to use discretion as necessary to take any additional actions—either to provide more stimulus during short-term difficulties or to adjust the automatic features themselves—rather than adhering to fiscal targets that may no longer be appropriate when economic conditions change.
Topic:
Financial Crisis, Economy, Fiscal Policy, and Fiscal Deficit
Political Geography:
Global Focus

5. Startups in the United States during the pandemic reflect some dynamism amid job losses

Author:
Simeon Djankov and Eva (Yiwen) Zhang
Publication Date:
05-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
New business applications have surged in the United States since the start of the COVID-19 pandemic. The growth is driven largely by startups in online retail, transportation, and personal services. Many of these new entrepreneurs are self-employed and were likely laid off and forced into entrepreneurship by necessity. No official data are available yet on the number of businesses destroyed in 2020, because business data for firms that close without entering bankruptcy are lagging. But the authors calculate that firm births may have surpassed firm deaths during the pandemic. While this boom in business entry is a tribute to the adaptability and potential innovative spirit in US capitalism, one should not be overly optimistic about jobs created in this wave of startups. As many of these new startups are by people forced to strike out on their own, the number of jobs created per new firm is even smaller than it was during previous US recessions. And like online businesses started around the last recession (e.g., Uber, Airbnb, and Venmo), some of these new firms may turn out to be major contenders in their sectors, displacing workers employed by their traditional rivals.
Topic:
Science and Technology, Labor Issues, Financial Crisis, and COVID-19
Political Geography:
North America and United States of America

6. Creation of a European Solidarity Funds: Directing Europeans’ savings towards their growth companies

Author:
Emmanuel Sales
Publication Date:
11-2020
Content Type:
Policy Brief
Institution:
Robert Schuman Foundation (RSF)
Abstract:
Europe has an excess of savings and its companies lack equity capital. This diagnosis was made a long time ago and the crises the continent has been going through over the last 10 years have accentuated this gap. European growth companies are rapidly falling prey to large non-European firms that benefit from a deep and liquid stock market. Thus, despite the existing arrangements, Europe is unable to impose world champions that would allow it to build its sovereignty against the United States and China. The creation of a new category of UCITS funds open to all EU savers, the European Sovereign Funds, would help us respond to this challenge by providing medium-sized companies with the fresh capital they need to ensure their development and independence.
Topic:
Financial Crisis, European Union, Economic Growth, and Capital
Political Geography:
Europe

7. When more delivers less: Comparing the US and French COVID-19 crisis responses

Author:
Jérémie Cohen-Setton and Jean Pisani-Ferry
Publication Date:
06-2020
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The US package of measures to help households hit by the economic shock from the COVID-19 crisis, including the Paycheck Protection Program, is almost twice as large in proportion of GDP as the French package, but it has proven less effective in curbing unemployment because of poor design and implementation. In contrast, the increase in the unemployment rate in France has been five times less than the increase in the United States. Cohen-Setton and Pisani-Ferry dive beneath the unreliable headline numbers to assess the effectiveness of government support provided to households in March–May 2020 in the two countries. They conclude that the French approach (mirrored in some other European countries) delivered a bigger bang for the buck. But the fact that the US approach has fallen short should not diminish the significance of the policy shift signaled by the enactment of measures to maintain household income.
Topic:
Education, Financial Crisis, European Union, and COVID-19
Political Geography:
Europe, France, North America, and United States of America

8. A possible IMF Pandemic Support Facility for emerging-market countries

Author:
Matthew Fisher and Adnan Mazarei
Publication Date:
07-2020
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
As the International Monetary Fund (IMF) adapts its strategy to meet the challenges of the COVID-19 crisis, it should develop a new temporary lending instrument to assist emerging-market countries facing pandemic-related fiscal and balance of payments difficulties. A dedicated IMF Pandemic Support Facility would help meet the exceptional financing needs of emerging-market countries at a time of high uncertainty while providing more lenient repayment periods and also allow the Fund to be more flexible in its operations with minimum disruptions to its existing facilities.
Topic:
Emerging Markets, International Monetary Fund, Financial Crisis, and COVID-19
Political Geography:
Global Focus

9. Lebanon's monetary meltdown tests the limits of central banking

Author:
Patrick Honohan and Adnan Mazarei
Publication Date:
09-2020
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Lebanon has spent the last 20 years juggling an excessive level of debt and current account deficits. Apparent financial wizardry by the central bank (Banque du Liban) helped keep the exchange rate fixed, inflation low, and debt service flowing until 2020. But these efforts merely postponed the inevitable, at a high cost. Repeated shocks to the Lebanese economy and governance weaknesses pushed the financial contraption over the cliff before the COVID-19 outbreak. The explosion that ripped through the Port of Beirut in early August added to the disarray. The Lebanese pound has crashed, the government has defaulted on some of its debt, and restrictions have been placed on deposit withdrawals and access to foreign exchange. Lebanon faces an uncertain future of uneven suffering. It will need foreign assistance, but such assistance will not extend to covering the losses of the banking system. How the losses are distributed will set the scene for Lebanon’s future development. Policymakers should aim for fairness, predictability, and stability without overindebtedness.
Topic:
Monetary Policy, Financial Crisis, Central Bank, and Banking
Political Geography:
Middle East and Lebanon

10. Sovereign debt relief in the global pandemic: Lessons from the 1980s

Author:
Edwin M. Truman
Publication Date:
10-2020
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The coronavirus pandemic and an unprecedented global recession have triggered fears of a debt crisis requiring massive intervention by international financial institutions as well as debt restructuring by private and official creditors. Truman draws two lessons for the current crisis, based on his ring-side experience during the debt crises of the 1980s. First, the initiation of debt relief will require a broad consensus among four groups: the borrowing countries, their foreign creditors, the authorities of the countries in which those creditors are located, and international institutions. Reaching consensus takes time. Second, implementation of the consensus framework will be case by case, because of differences in the political and economic circumstances of each country, which will militate against simple replication for different countries and against implementation all at the same time. Any framework will not be self-implementing. While the call for rapid action is understandable, applying a one-size-fits-all approach will not be possible.
Topic:
Debt, Emerging Markets, History, International Monetary Fund, Financial Crisis, World Bank, and COVID-19
Political Geography:
Global Focus

11. Financing the United Nations Secretariat: Resolving the UN’s Liquidity Crisis

Author:
Wasim Mir
Publication Date:
03-2020
Content Type:
Policy Brief
Institution:
International Peace Institute
Abstract:
The UN is currently facing its most challenging financial situation in nearly two decades. Despite taking emergency measures to reduce spending, the UN Secretariat’s severe liquidity problems have been getting progressively worse, to the point where they are starting to affect the UN’s ability to carry out its mandates. The main cause of this crisis is the late payment and nonpayment of member-state contributions. This issue brief breaks down the reasons why certain member states have not been paying in full or on time, which include the withholding of payments to express concerns about specific UN activities and domestic financial difficulties. It then considers the proposals the secretary-general has put forward to address the crisis: replenishing the existing reserves, incentivizing member states to make timelier payments by invoking Article 19 of the UN Charter sooner, and limiting the General Assembly’s use of creative measures to reduce spending. Since these proposals currently have little backing from member states, the paper also suggests looking at alternative approaches, including allowing the UN Secretariat to borrow commercially or pool cash balances. As the domestic dynamics that lead to late payment and nonpayment will not change quickly, the paper urges member states not to ignore the issue and hope that it will resolve itself. They need to urgently consider what measures could help mitigate the crisis as soon as possible.
Topic:
United Nations, Financial Crisis, and Finance
Political Geography:
Global Focus

12. It’s Time for a New Deal

Author:
Constantine Michalopoulos
Publication Date:
01-2020
Content Type:
Policy Brief
Institution:
Hellenic Foundation for European and Foreign Policy (ELIAMEP)
Abstract:
The prospects of the Greek economy are mostly good with growth continuing for the fourth straight year. But there is a sense of disappointment, as the recovery has not been very strong and pre-crisis income levels will not be regained for another decade. There are two main reasons for the sluggish recovery: The European creditors have imposed on Greece the requirement to run a primary budget surplus of 3.5% of GDP for five years to ensure that they get repaid—a requirement that constricts growth of the Greek private sector—through heavy taxation of consumers and business. And domestic investment is sluggish, although there are plenty of unutilized resources, such as those provided by the European Structural Funds. There is a need for a new deal with the European Institutions: the Europeans should be more relaxed about getting repaid because of Greece’s much improved access to the European capital markets and be willing to accept a Greek government commitment to a significantly lower primary budget surplus for the next several years. In exchange the Greek government should commit to a commensurate increase in domestic investment through reforms of the banking sector as well as greater public sector investment spending.
Topic:
Government, Financial Crisis, Economy, Economic Growth, and Public Spending
Political Geography:
Europe and Greece

13. Iran Has a Slow Motion Banking Crisis

Author:
Adnan Mazarei
Publication Date:
06-2019
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Suffering under Western sanctions and security challenges, Iran faces problems as well from its fragile banking system, which has been languishing for decades. Liquidity and solvency weaknesses pose a growing risk to the country’s financial stability. The sanctions reimposed by the United States in 2018 have heightened these vulnerabilities, but the problems also result from the heavy-handed role of the state, corruption, and the Central Bank of Iran’s failure to regulate and supervise the system. Iran’s ability to avoid a run on its banks is aided by their reliance on liquidity assistance, deposit insurance, and regulatory forbearance from the central bank. Depositors are forced to be patient because they have limited options to invest elsewhere. Iran has thus avoided a full-blown banking crisis. But the situation is not sustainable. Banks remain susceptible to external shocks, which could come from a complete halt to oil exports or war.
Topic:
Security, Financial Crisis, Sanctions, Banks, and Financial Institutions
Political Geography:
Iran, Middle East, North America, and United States of America

14. Keeping Up with the Future: Upgrading Forecasts of Political Instability and Geopolitical Risk

Author:
Cullen S. Hendrix and Sooyeon Kang
Publication Date:
07-2019
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The nature and magnitude of geopolitical risk is changing more rapidly than the ability to anticipate it, with increasingly severe economic consequences. This Policy Brief discusses the economic costs and risks associated with episodes of political instability, arguing that firms, government agencies, and international institutions must update their forecasting and risk assessment efforts to take global factors into account. Since the global financial crisis, political instability has shifted from emerging-market countries in the developing world to larger, more globally impactful econo¬mies. Acknowledging this changing risk profile—and developing better tools to predict major episodes of instability—will allow both policymakers and firms to plan with greater confidence.
Topic:
Economics, Financial Crisis, Geopolitics, Political stability, and Risk
Political Geography:
Global Focus

15. Hezbollah Prioritizes Its Own Interests, Putting Lebanon at Risk

Author:
Matthew Levitt
Publication Date:
10-2019
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
As demonstrators rail against economic problems, corruption, and sectarianism, the group’s role in undermining the public’s financial and physical security is coming under greater scrutiny. Lebanese citizens took to the streets this weekend to protest the country’s acute financial crisis, which has been marked by one of the highest debt ratios in the world, a new currency crisis, and fears that a strike will close gas stations indefinitely. Many believe that deep-rooted corruption and sectarianism got them into this mess, and may now complicate efforts to get them out. Against this backdrop, more criticism is being directed at Hezbollah, the widely designated terrorist organization that is simultaneously the most powerful party in Lebanon’s government and an aggressively sectarian movement that keeps its activities and weapons outside the government’s control. As the Treasury Department recently noted, developments over the past few weeks have underscored the extent to which the group’s actions “prioritize its interests, and those of its chief sponsor, Iran, over the welfare of Lebanese citizens and Lebanon’s economy.”
Topic:
Foreign Policy, Corruption, Financial Crisis, Protests, and Hezbollah
Political Geography:
Middle East and Lebanon

16. Global Forums: Are They Must or Waste for the Global Governance?

Author:
Gülen Derya Zayim
Publication Date:
02-2019
Content Type:
Policy Brief
Institution:
Global Political Trends Center
Abstract:
The age of globalization has brought about interdependency between the nation-states in all aspects of life while uncovering challenges for the sovereignty of the nations. Therefore, how an integrated world system involving multiple actors can efficiently be governed remain a subject of serious discussions. This study briefly explains the historical background of G7/8 along with its evolution to G20 and discusses their effectiveness and legitimacy in the context of global governance. It is worthy to discuss the issue since these global forums’ legitimacy and effectiveness subject to both critics and praises. Although the lessons from the global financial crisis consolidates the idea of global coherence, integrity and compliance, diverging political and economic conflict of interest of nations still make the international forums’ existence and future position in global governance open to discussions. Additionally, the last part of the study draws conclusion about Turkey and its place in global governance.
Topic:
Sovereignty, Financial Crisis, Governance, and G20
Political Geography:
Turkey, Middle East, Global Focus, and Mediterranean

17. Great Expectations: Is the IMF Turning Words into Action on Inequality?

Author:
Nadia Daar, Nicholas Galasso, and Chiara Mariotti
Publication Date:
10-2017
Content Type:
Policy Brief
Institution:
Oxfam Publishing
Abstract:
In recent years, the International Monetary Fund has become a global leader in highlighting the inequality crisis; consistently identifying it as a major threat to human progress and prosperity. This is a significant shift from its previously held position that rising inequality was a necessary trade-off for achieving greater economic growth. What is the IMF doing in practice to operationalize its agenda for tackling inequality? The IMF’s main initiative has been a series of pilots that integrate inequality analysis into its economic surveillance of countries. This paper outlines Oxfam’s evaluation of these pilots and finds that they are not promoting policies that reduce inequality. It gives recommendations for the IMF to systematically incorporate the fight against inequality into its research and its actions on the ground
Topic:
International Cooperation, Financial Crisis, Inequality, and IMF
Political Geography:
Global Focus

18. Economic Distress and the Inevitability of an Economic Recovery Programme

Author:
Zambia Institute for Policy Analysis & Research (ZIPAR)
Publication Date:
03-2017
Content Type:
Policy Brief
Institution:
Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:
Zambia is emerging from a major economic downturn. The copper price collapse, electricity shortages, huge fall in the value of the Kwacha and high inflation in 2015 left the economy stalling. Growth in 2015 was 2.9% and possibly 3.4% in 2016, significantly below the long-term average rate of 6.9%. The downturn was compounded by a tightening of monetary policy which made it harder for businesses to borrow, and by a continuation of expansionary fiscal policies which increased the budget deficit and Government debt. Because the scale of the challenge was so significant, the Government announced it would launch Zambia Plus, a home-grown recovery programme to put the economy back on track. A credible recovery programme will be essential to instill fiscal discipline, create conditions for growth, and support poverty reduction. A failure to the programme will result in significant adverse consequences for the economy and Zambian households. Without Zambia Plus, the budget deficit (measured as a percentage of GDP) is likely to continue performing worse than the authorities’ targets. Thus, the overall debt level will keep growing, possibly reaching an average of 58.6% of GDP over 2017-2021, up from an average of 23.3% over 2007-2014. More debt will mean a bigger budget taken to meet debt servicing obligations. For instance, in 2017 alone the Government allocated almost ¼ of the budget to debt servicing and arrears payments. This is the equivalent of over K15 billion that could otherwise be spent on tackling poverty or supporting growth. The current path is unsustainable, and the consequences of failing to act are likely to be felt hardest by the poor, who already bear the brunt. Analysis of the 2015 Budget reveals that when the economic downturn set in the most significant underspends were on social cash transfers, the economic empowerment fund and the public service pension fund. So, the absence of Zambia Plus will do bigger and longer lasting damage to the lives of poor Zambians than will the few challenges of the programme.
Topic:
Financial Crisis, Economy, and Public Debt
Political Geography:
Africa and Zambia

19. Assessing the Governance Practices of Sustainability Reporting

Author:
Jason Thistlethwaite and Melissa Menzies
Publication Date:
01-2016
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
To promote climate change risk mitigation in financial markets, the Financial Stability Board recently proposed the creation of a Climate Disclosure Task Force, coordinated through the G20, to develop standards for companies to disclose their exposure to climate change risks. With more than 400 existing disclosure schemes, this task will be challenging. This brief identifies the key categories of governance practices that must be addressed, how these divergent practices challenge end-users, and how the establishment of criteria that define effective and efficient reporting is a critical first step for the Climate Disclosure Task Force.
Topic:
Climate Change, Economics, Markets, and Financial Crisis
Political Geography:
Global Focus

20. Does the Level of Public Debt Matter?

Author:
Susan Schadler
Publication Date:
04-2016
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
Research on links between the level of a country’s public debt and its broader economic developments has been heatedly debated in the economic literature. Two strands of the research stand out — one linking the level of debt to a country’s GDP growth rate and the other examining the debt level as an EWI of economic crises. As a broad generalization, research at the moment favors the view that high levels of debt are not a cause, in and of themselves, of low growth nor are they particularly good predictors of impending economic or even debt crises. In principle, the empirical findings have obvious implications for policy makers confronting the question of how to fashion policies (and fiscal policy in particular) when a country has a high debt burden. The IMF, as both a contributor to the literature and an adviser concerned with preventing or dealing with debt crises, has a particularly important stake in navigating the findings. Whether in its surveillance (routine annual advice to all member countries) or the construction of its lending programs to support countries in or near crisis, the IMF must answer the question “how much does the level of debt matter?” Despite the empirical research that casts doubt on the importance of debt, the level of debt figures prominently in the algebra of debt sustainability and the IMF’s real world policy advice. This policy brief examines the nexus of the relatively strong conclusions coming from the academic research and the IMF’s policy advice. It addresses the following question: given that the broad conclusion from the academic literature is that the level of debt itself is not systematically bad for growth or stability, why does the debt level seem to figure rather prominently in the IMF’s policy advice and conditionality?
Topic:
Debt, Development, Economics, International Monetary Fund, Financial Crisis, GDP, and Global Markets
Political Geography:
Global Focus