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Begin New Search Topic Financial Crisis Political Geography Global Focus Content Type Working Paper Publication Year within 25 Years Publication Year within 5 Years

1. Global Value Chain Disruptions and Firm Survival During COVID-19: An Empirical Investigation

Author:
Sasidaran Gopalan and Ketan Reddy
Publication Date:
08-2023
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Despite the rapid acceleration of countries participating in global value chains (GVCs) over the last three decades, global GVC participation rates have plateaued since the global financial crisis (GFC) and worsened with the onset of the coronavirus disease (COVID-19) pandemic. The massive supply chain disruptions induced by the pandemic not only appeared to expose the vulnerabilities of GVCs, largely because of concentration risks, but also contributed to a dramatic decline in trade flows globally. As countries around the world emerge from the shadows of the pandemic, there is growing academic and policy interest in deciphering how countries should build effective strategies that facilitate firm survival, especially viewed from the lens of resilience and robustness. Considering this background, in this paper, we propose to make a twofold contribution to this literature. First, we undertake a comprehensive firm-level investigation (in a cross-country setting) to ascertain whether firms engaged in GVCs relative to non-GVC firms exhibited better survival instincts during the COVID-19 pandemic. Second, we uncover the heterogeneity of the shock across sectors and industries, considering the varied sectoral/industrial exposure to the COVID-19 pandemic. We document that GVC firms showcased greater robustness and resilience during the pandemic phase compared with other firms. Our results also show that the degree of resilience and robustness varies significantly by industry.
Topic:
Financial Crisis, Trade, Global Value Chains, and COVID-19
Political Geography:
Global Focus

2. The IMF should enhance the role of SDRs to strengthen the international monetary system

Author:
Edwin M. Truman
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The special drawing right (SDR), issued by the International Monetary Fund (IMF), has the potential to strengthen dramatically the international monetary system. Established in 1969 and allocated twice during its first decade, the SDR was in the institutional closet from 1980 until 2009, when $250 billion in SDRs was allocated to members of the IMF to help address the global financial crisis. In 2021 another $650 billion in SDRs was allocated to help address the coronavirus pandemic. The SDR has proved itself as a crisis instrument. This paper addresses critically the arguments against SDR allocations. It proposes regular annual SDR allocations, along with measures to make the SDR more attractive to critics and measures to build out the SDR system in support of the international monetary system. The paper includes an appendix on the history of the SDR. A second appendix analyzes SDR use following the 2009 and 2021 allocations and finds that contrary to the popular myth, many countries other than low-income members of the IMF benefited directly in multiple ways from those allocations.
Topic:
International Trade and Finance, Financial Crisis, Finance, and IMF
Political Geography:
Global Focus

3. Reigniting labour productivity growth in developing countries: Do structural reforms matter?

Author:
Kwamivi Gomado
Publication Date:
08-2022
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
While the negative effects of the 2008 global financial crisis on labour productivity are still fresh in people’s minds, the COVID-19 pandemic raises concerns that productivity will continue to decline. To boost labour productivity and regain economic performance, there is an empirical consensus on the role of structural reforms that allows an efficient reallocation of resources such as labour by reducing rigidities in markets. This study analyses the role of certain structural reforms in improving labour productivity in 35 developing countries over the period of 1990–2014. From the local projection method, our results show that structural reforms have a positive impact on productivity growth in the short and medium terms. The results also illustrate that reforms induce an efficient reallocation of resources within but not between sectors. Taking the business cycle into account in estimates shows that structural reforms stimulate labour productivity growth better in periods of low economic growth.
Topic:
Labor Issues, Financial Crisis, Reform, Business, Economic Growth, and Productivity
Political Geography:
Global Focus

4. Central Banks Caught Between Market Liquidity and Fiscal Disciplining: A Money View Perspective on Collateral Policy

Author:
Jakob Vestergaard and Daniela Gabor
Publication Date:
12-2021
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Despite much attention to unconventional monetary policies after the financial crisis, the collateral policies of central banks are rarely discussed. And when they are, the haircuts applied to assets pledged to access central bank liquidity tend not to be analyzed. An exception to these trends is the recent work by Nyborg (2017), who argues that the collateral policies adopted by the European Central Bank (ECB) aggravated the sovereign debt crisis and put the survival of the euro at risk. Taking our point of departure in the money view literature (Mehrling 2011), we argue however that Nyborg’s critique of the ECB’s crisis response is misguided and that his proposal to deepen and reinforce the ECBs role in the fiscal disciplining of member states would be procyclical and destabilizing. Through our analysis of Nyborg’s work and the ECBs crisis response, we identify core principles for countercyclical collateral policies suitable for market-based financial systems.
Topic:
Monetary Policy, Financial Crisis, Finance, and Banking
Political Geography:
Global Focus

5. Low inflation bends the Phillips curve around the world: Extended results

Author:
Jami Forbes, Joseph E. Gagnon, and Christopher G. Collins
Publication Date:
09-2021
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper revises and extends PIIE Working Paper 20-6. It continues to find strong support for a Phillips curve that becomes nonlinear when inflation is "low"—which our baseline model defines as less than 3 percent. The nonlinear curve is steep when output is above potential (slack is negative) but flat when output is below potential (slack is positive) so that further increases in economic slack have little effect on inflation. This finding is consistent with evidence of downward nominal wage and price rigidity. When inflation is high, the Phillips curve is linear and relatively steep. These results are robust to placing the threshold between the high and low inflation regimes at 2, 3, or 4 percent inflation or for a threshold based on country-specific medians of inflation. In this nonlinear model, international factors play a large role in explaining headline inflation (albeit less so for core inflation), a role that has been increasing since the global financial crisis.
Topic:
Economics, Financial Crisis, Inflation, and Philips Curve
Political Geography:
Global Focus

6. Fiscal Policy as Credit Policy: Reassessing the Fiscal Spending vs. Private Debt Trade-Off

Author:
Etienne Lepers
Publication Date:
01-2021
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
This paper revisits the dominant narrative that explains the substantial household credit boom as a substitute to fiscal redistribution, i.e. the “substitution” hypothesis, according to which fiscally-constrained governments substituted public safety nets by private credit. I argue instead that the credit and welfare state constituencies may not necessarily be the same and that far from fiscally constrained, governments have been actively using “fiscal policy as credit policy”. I provide two sets of empirical evidence for such account: First, I find a positive within-country relationship between household debt and fiscal spending. Second, compiling a unique dataset of 550 fiscal subsidies adjustments in 50 countries since 1980, I show that fiscal and tax subsidies have been instrumental in driving household credit. These dynamics have distributional and financial stability implications as such tax subsidies typically favour higher income households and household debt booms have proven more dangerous than corporate ones.
Topic:
Debt, Financial Crisis, Welfare, Financialisation, Subsidies, Household, and Public Finance
Political Geography:
Global Focus

7. Individual Accountability in International Economic Policymaking after the Global Financial Crisis

Author:
Stefano Pagliari and Iosif Kovras
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
In the aftermath of the global financial crisis, the design of accountability mechanisms has taken on renewed importance in academic and policy debates. Calls for holding individuals whose actions and omissions contributed to the meltdown accountable have gained traction in a number of countries after the crisis. Yet, individual accountability norms are seemingly absent from the international economic agenda in response to crisis. In this paper we address this puzzle by exploring the evolution of two major international organisations, the IMF and the FSB, in bringing accountability following financial crises. Our analysis reveals how these institutions have increasingly incorporated in their toolkit policy recommendations related to the unethical or illegal conduct by government officials of individuals in the financial industry, but these tools were geared almost exclusively towards forward-looking policies designed to deter the reoccurrence of illegal or unethical behavior rather than punishing or scrutinizing past wrongdoing. We argue that the extent to which individual accountability norms permeate the international economic agenda is mediated by the institutional characteristics of the organizations that comprise the international financial regime.
Topic:
Financial Crisis, Governance, Culture, Accountability, and Bureaucracy
Political Geography:
Global Focus

8. International Financial Regulation: Why It Still Falls Short

Author:
William White
Publication Date:
07-2020
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
While recent reforms are welcome in many ways, there are still significant reasons to doubt that the post-crisis tightening of international financial regulation guarantees future financial and economic stability. The most important reason is that the reforms have focused too narrowly on ensuring that an unstable financial sector will not aggravate downturns by restricting the supply of credit. More attention needs to be paid to ensuring that an overly exuberant financial system does not weaken other parts of the economy by encouraging a rapid buildup of debt during upturns. Some combination of time-varying monetary and regulatory policies (a macrofinancial stability framework) will be required to do this. In addition, many of the individual regulatory measures taken to date, both macroprudential and microprudential, have shortcomings. Their coherence as a package has also been questioned.
Topic:
Political Economy, Financial Crisis, Reform, Banks, and Subsidies
Political Geography:
Global Focus

9. This Time Was Different: The Global Safe Asset Shortage and Shadow Banking in Socio-Historical Perspective

Author:
Photis Lysandrou and Anastasia Nesvetailova
Publication Date:
01-2020
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
Safe assets and shadow banking are two closely linked phenomena in contemporary finance. The link is loan securitisation: at a time of a global safe asset shortage, it falls on the shadow banking system to help make good that shortage by manufacturing extra quantities of asset backed securities. When these quantities cannot keep up with volume of safe asset demand, the shadow banking system comes under pressure to manufacture the type of complex structured securities that can potentially cause a financial crisis. That potentiality became reality with the great financial crisis of 2007-8. If a further financial crisis of this scale is to be averted, the regulation of the shadow banking system should be informed by an understanding of the contemporary socioeconomic circumstances that continue to cause a global safe asset shortage. This paper attempts to contribute to such an understanding.
Topic:
Financial Crisis, Banking, Securitization, and Safe Asset
Political Geography:
Global Focus

10. Sovereign debt restructuring: The centrality of the IMF's role

Author:
Sean Hagan
Publication Date:
07-2020
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Over the past 40 years, the International Monetary Fund (IMF) has played a central role in the sovereign debt restructuring process. If the COVID-19 pandemic leads to a significant wave of sovereign debt distress, this role will be closely scrutinized. The paper analyzes how IMF policies have evolved to shape the incentives of sovereigns and their creditors at each stage of the sovereign debt restructuring process. It also identifies a number of issues that the IMF will likely have to address as a result of the pandemic, including (1) assessment of debt sustainability in a macroeconomic environment of considerable uncertainty, (2) treatment of official bilateral creditors, and (3) potential benefits—and challenges—of introducing additional incentives to maximize creditor participation in any debt restructuring.
Topic:
Debt, Emerging Markets, Government, International Monetary Fund, Financial Crisis, Macroeconomics, and COVID-19
Political Geography:
Global Focus

11. Coping with Disasters: Two Centuries of International Official Lending

Author:
Sebastian Horn, Carmen M. Reinhart, and Christoph Trebesch
Publication Date:
06-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Official (government-to-government) lending is much larger than commonly known, often surpassing total private cross-border capital flows, especially during disasters such as wars, financial crises and natural catastrophes. We assemble the first comprehensive long-run dataset of official international lending, covering 230,000 loans, grants and guarantees extended by governments, central banks, and multilateral institutions in the period 1790-2015. Historically, wars have been the main catalyst of government-to-government transfers. The scale of official credits granted in and around WW1 and WW2 was particularly large, easily surpassing the scale of total international bailout lending after the 2008 crash. During peacetime, development finance and financial crises are the main drivers of official cross-border finance, with official flows often stepping in when private flows retrench. In line with the predictions of recent theoretical contributions, we find that official lending increases with the degree of economic integration. In crises and disasters, governments help those countries to which they have greater trade and banking exposure, hoping to reduce the collateral damage to their own economies. Since the 2000s, official finance has made a sharp comeback, largely due to the rise of China as an international creditor and the return of central bank cross-border lending in times of stress, this time in the form of swap lines.
Topic:
Debt, International Political Economy, War, History, Financial Crisis, Trade, and Banking
Political Geography:
Global Focus

12. The Cost of Holding Foreign Exchange Reserves

Author:
Eduardo Levy Yeyati and Eduardo Gómez
Publication Date:
05-2019
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
Recent studies that have emphasized the costs of accumulating reserves for self-insurance purposes have overlooked two potentially important side-effects. First, the impact of the resulting lower spreads on the service costs of the stock of sovereign debt, which could substantially reduce the marginal cost of holding reserves. Second, when reserve accumulation reflects countercyclical LAW central bank interventions, the actual cost of reserves should be measured as the sum of valuation effects due to exchange rate changes and the local-to-foreign currency exchange rate differential (the inverse of a carry trade profit and loss total return flow), which yields a cost that is typically smaller than the one arising from traditional estimates based on the sovereign credit risk spreads. We document those effects empirically to illustrate that the cost of holding reserves may have been considerably smaller than usually assumed in both the academic literature and the policy debate.
Topic:
Financial Crisis, Exchange Rate Policy, International Reserves, and Capital Flows
Political Geography:
Global Focus and United States of America

13. Evolve or Perish: The Global Forces Changing the Business of Banks

Author:
Robert Fay and Angelo Arcelli
Publication Date:
04-2019
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
Following the 2008 financial crisis, the Group of Twenty embarked on an ambitious financial regulatory reform plan that has seen many banks worldwide make substantial progress in terms of both capitalization and governance. Over this period, banks have also become increasingly exposed to business risks from digitization, artificial intelligence and cybercrime, and major investments are necessary to manage these risks. New regulations have been introduced in the European Union to reduce these risks, but their associated costs have potentially created a lasting competitive disadvantage for European banks. This situation has raised some key questions that deserve to be discussed and investigated: How does regulation — including that outside the sector — affect banks’ ability to compete globally? What will be the impact of fintech players as well as globally active banks from China and other emerging markets? Can the Basel regulatory framework and Financial Stability Board (FSB) ensure a level playing field globally going forward, or has the regulatory pendulum swung too far? How will the supervisory approach need to be adapted to the changing structure of the global financial system? Moreover, how will the implementation of Basel reforms affect the industry? These and other questions remain about the effectiveness of the already-achieved reforms as well as their future direction. These issues were at the core of CIGI and Oliver Wyman’s fifth annual Financial Regulatory Outlook Conference, held in Rome on November 28, 2018. This conference report summarizes the key points of discussions at the conference, with a special focus on the 10 years of regulatory reform that was conducted under the auspices of the FSB and the new forces that are currently affecting banks and could have an impact on the future.
Topic:
Financial Crisis, Regulation, Europe Union, and Digital Culture
Political Geography:
Europe and Global Focus

14. International Coordination of Economic Policies in the Global Financial Crisis: Successes, Failures, and Consequences

Author:
Edwin M. Truman
Publication Date:
07-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper evaluates international efforts to diagnose the global financial crisis and decide on appropriate responses, the treatments that were agreed and adopted, and the successes and failures as the crisis unfolded. International coordination of economic policies eventually contributed importantly to containing the crisis, but the authorities failed to agree on a diagnosis and the consequent need for joint action until the case was obvious. The policy actions that were adopted were powerful and effective, but they may have undermined prospects for coordinated responses to future crises.
Topic:
Government, International Cooperation, Financial Crisis, and Economy
Political Geography:
Global Focus

15. International Coordination of Economic Policies in the Global Financial Crisis: Successes, Failures, and Consequences

Author:
Edwin M. Truman
Publication Date:
07-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper evaluates international efforts to diagnose the global financial crisis and decide on appropriate responses, the treatments that were agreed and adopted, and the successes and failures as the crisis unfolded. International coordination of economic policies eventually contributed importantly to containing the crisis, but the authorities failed to agree on a diagnosis and the consequent need for joint action until the case was obvious. The policy actions that were adopted were powerful and effective, but they may have undermined prospects for coordinated responses to future crises.
Topic:
International Affairs, Financial Crisis, Economic Policy, and Fiscal Policy
Political Geography:
Global Focus

16. Responding to Economic and Ecological Deficits

Author:
Jonathan M. Harris
Publication Date:
04-2019
Content Type:
Working Paper
Institution:
Global Development and Environment Institute at Tufts University
Abstract:
Macroeconomic theory was shaken up in the wake of the financial crisis, with neoclassical approaches proving inadequate to analyze or respond to the need for policy action. Despite efforts to return to more conventional macro perspectives, a continuing re-evaluation of economic theory has important implications both for traditional economic concerns such as employment and inflation, and for ecological issues and the climate crisis. An emerging “green Keynesian” approach combines a radical Keynesian analysis with ecological priorities such as drastic carbon emissions reduction. One important aspect of this reorientation of theory is the analysis of economic and ecological deficits. In the years since the financial crisis, both economic and ecological deficits have increased. This poses a challenge for “green Keynesian” policy. It is therefore necessary to have effective analyses to measure and respond to ecological deficits, as well as policy measures to deal with economic deficits. This paper proposes a new approach to measuring ecological deficits, and a new perspective on economic deficits and debt. Since there is no single unitary measure for depletion or degradation of different kinds of resources, it is necessary to measure different kinds of deficit for different resources, with a goal of reducing all of these to zero or replacing them with surpluses. The analysis involves exploring the specific economic implications of reducing both ecological and economic deficits, which involves re-conceptualizing economic growth and "degrowth", and provides an alternative to current U.S. policies under the Trump administration, which are contributing to widening both deficits.
Topic:
Climate Change, Debt, Financial Crisis, and Macroeconomics
Political Geography:
Global Focus