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1. Xi Demands Fealty Despite Domestic And Foreign Woes

Author:
Willy Wo-Lap Lam
Publication Date:
01-2024
Content Type:
Journal Article
Journal:
China Brief
Institution:
The Jamestown Foundation
Abstract:
The Politburo held a “democratic life meeting (民主生活会)” on December 21–22, 2023, in which President Xi Jinping gave an internal, unpublished speech. According to accounts provided to the author by three officials at the rank of department head or above, Xi admitted that he had repeatedly postponed the Third Plenum of the 20th Central Committee (which according to Party norms should have taken place in October) because he “could not offer any viable solution for the nation’s problems.” Xi, who is general secretary of the Chinese Communist Party (CCP) and commander-in-chief, went on to blame the other 23 Politburo members and other senior cadres, not only for failing to give him good advice but also for demonstrating signs of disobedience. Reports of Xi’s frank admission of the dire straits of the Party’s leadership were widely circulated on social media. The official Xinhua read-out of the Politburo meeting also cited Xi as demanding “unison of thought” among top-tier officials. This entails adhering closely to the instructions of the “core leadership”—in other words, to Xi himself (Xinhua, December 25, 2023). The supreme leader raised the “two safeguards (两个维护),” a slogan that refers to “safeguarding the authority of comrade Xi Jinping as core of the party” and “safeguarding Xi Jinping Thought on socialism with Chinese characteristics for a new era.” President Xi also admonished his close advisors to “take a firm grip on the internal laws of developments [of issues]; accurately distinguish between events and trends, crises and opportunities, and benefits and harms … and effectively combat risks and take action on the basis of stability” (People’s Daily, December 23, 2023). This instruction tallies with caveats given by Xi throughout the past year, in which he has warned that China faces unprecedented challenges and that the party-state apparatus must ready itself to tackle “black swans and gray rhinos.”
Topic:
Financial Crisis, Leadership, Xi Jinping, Chinese Communist Party (CCP), and Banking
Political Geography:
China and Asia

2. Why can ASEAN Promote Sustainable Development Cooperation?

Author:
Cao Ting and Luo Yongkun
Publication Date:
12-2024
Content Type:
Journal Article
Journal:
Revista Brasileira de Política Internacional (RBPI)
Institution:
Instituto Brasileiro de Relações Internacionais (IBRI)
Abstract:
ASEAN has arguably been one of the most successful regionalisms, which since its inception has undergone several profound challenges, including the 1997 Asian financial crisis. In response to the fierce competition among major powers and the economic and social challenges, ASEAN has concentrated on sustainable development to promote unity and centrality. Sustainable development cooperation aligns with the interests of ASEAN states and helps to promote the construction of the ASEAN community and strike a balance of power on the world stage. Nevertheless, there may be a need for more efforts to resolve the challenges facing sustainable development.
Topic:
International Cooperation, Financial Crisis, Sustainable Development Goals, Regionalism, and ASEAN
Political Geography:
Asia and Southeast Asia

3. The Greek Tragedy: Narratives and Imagined Futures in the Greek Sovereign Debt Crisis

Author:
Jens Beckert and Hans Lukas Richard Arndt
Publication Date:
04-2024
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
Between 2009 and 2015 Greece underwent a profound sovereign debt crisis that led to a serious political crisis in Europe and the restructuring of Greek debt. We argue that the prevalence of negative narratives about the future contributed to the changes in spreads of Greek bonds during the crisis. We support our argument by presenting results from text mining a corpus of 9,435 articles from the Financial Times and the Wall Street Journal. Based on sentiments and a machine learning model predicting future reference, we identify newspaper articles which generate negative and uncertain outlooks for the future in the expert discourse. We provide evidence from time series regression analysis showing that these negative imagined futures have explanatory power in models estimating spread development of Greek vs. German sovereign bonds. We suggest that these findings provide good evidence for the relevance of “imagined futures” for investors’ behavior, and give directions for an innovative contribution of sociology to understanding the microfoundations of financial crises.
Topic:
Debt, Financial Crisis, Financial Markets, Future, Sovereign Debt, Economic Sociology, Sentiment Analysis, and Valuation
Political Geography:
Europe and Greece

4. China as an International Lender of Last Resort

Author:
Sebastian Horn, Bradley C. Parks, Carmen M. Reinhart, and Christoph Trebesch
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper shows that China has launched a new global system for cross-border rescue lending to countries in debt distress. We build the first comprehensive dataset on China’s overseas bailouts between 2000 and 2021 and provide new insights into China’s growing role in the global financial system. A key finding is that the global swap line network put in place by the People’s Bank of China is increasingly used as a financial rescue mechanism, with more than USD 170 billion in liquidity support extended to crisis countries, including repeated rollovers of swaps coming due. The swaps bolster gross reserves and are mostly drawn by distressed countries with low liquidity ratios. In addition, we show that Chinese state-owned banks and enterprises have given out an additional USD 70 billion in rescue loans for balance of payments support. Taken together, China’s overseas bailouts correspond to more than 20 percent of total IMF lending over the past decade and bailout amounts are growing fast. However, China’s rescue loans differ from those of established international lenders of last resort in that they (i) are opaque, (ii) carry relatively high interest rates, and (iii) are almost exclusively targeted to debtors of China's Belt and Road Initiative. These findings have implications for the international financial and monetary architecture, which is becoming more multipolar, less institutionalized, and less transparent.
Topic:
Debt, Emerging Markets, International Trade and Finance, Financial Crisis, Belt and Road Initiative (BRI), and Sovereign Debt
Political Geography:
Africa, China, and Asia

5. 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

6. Cash Cabal: How Hezbollah Profits from Lebanon's Financial Crisis

Author:
Samara Azzi and Hanin Ghaddar
Publication Date:
06-2023
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
In March 2020, Lebanon opted for a “hard default” on $32 billion in sovereign debt, allowing the government to avoid negotiating with its Eurobond holders and investors. Beirut thereafter showed little interest in addressing the consequences of default, and the country’s economic meltdown worsened. As usual, the Lebanese people were the casualties, suffering amid what the World Bank has called a “deliberate depression.” This official negligence has cleared the way for a proliferating cash economy—which in turn has spawned a currency exchange scheme involving the central bank, foreign exchange agents, and Lebanese politicians. Hezbollah specifically has profited in areas ranging from real estate to solar energy, pharmaceuticals, and the illicit Captagon trade. In this Policy Note, authors Samara Azzi and Hanin Ghaddar—a venture capitalist and a former Lebanese journalist—skillfully diagram the corrupt status quo and explain why entrenched actors want to avoid systemic change. But as the study makes clear, the future health of the Lebanese economy requires an overhaul, and the international community must now press for deep reforms and personal accountability.
Topic:
Politics, Non State Actors, Financial Crisis, Economy, Hezbollah, and Shia Islam
Political Geography:
Middle East and Lebanon

7. The Egyptian Financial Crisis: Implications for the region, and for Israel too

Author:
Eran Lerman
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
Jerusalem Institute for Strategy and Security (JISS)
Abstract:
Egypt continues to play an active role in regional affairs, including the Aqaba emergency meeting on the Palestinian situation (February 26) and the ongoing effort to prevent escalation in Gaza. At the same time, Cairo is in the middle of a significant financial crisis. The effects of the war in Ukraine – specifically, grain shortages – brought the Egyptian pound to more than 30 to the dollar, up from 20 in November and 15 in early 2022, facilitated by deliberate government action in response to demands by the IMF. Inflation still soars, and so does youth unemployment. All this could destabilize a nation of 105 million on our border, with dire consequences.
Topic:
Financial Crisis, Conflict, Fiscal Policy, and Financial Stability
Political Geography:
Africa, Middle East, Israel, Egypt, and MENA

8. Can the Lira be saved?

Author:
Fadi Nicholas Nassar and Mike Azar
Publication Date:
03-2023
Content Type:
Video
Institution:
Middle East Institute (MEI)
Abstract:
MEI's US-Lebanon Fellow Fadi Nicholas Nassar speaks to Beirut-based international finance professional Mike Azar on Lebanon's financial crisis. What is the state of Lebanon's banking system, and how did it become so dysfunctional? What does Azar recommend to get Lebanon's economy back on track, and can the Lira be saved?
Topic:
Financial Crisis, Economy, and Banks
Political Geography:
Middle East and Lebanon

9. Decoding Financial Crises: Analyzing Predictors and Evolution

Author:
Young Sik Jeong and Yaein Baek
Publication Date:
08-2023
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
We examine factors that predict financial crises and the evolution of financial crises using non-traditional methodologies, such as machine learning and system dynamics. Firstly, in our random forest model, the top six most important predictors among 12 indicators for the entire period (1870-2017) are the slope of the yield curve, the CPI, consumption, the debt service ratio, equity return, and public debt. Secondly, even though the manifestations of financial crises differ in each case, five common characteristics have been identified by examining various past financial crisis cases using a system dynamics approach (causal loop diagram). The first characteristic is a feedback loop that reinforces credit expansion. Next, the feedback loop leads to the buildup of financial crisis risk. Third, there is the shock that triggers the financial crisis. Fourth, there are risk-spreading factors. Lastly, individual financial crises do not end in themselves but have the common characteristic of becoming the seeds of new crises. In conclusion, two key findings emerge. First, the financial crisis is a systemic problem rather than an individual risk factor. Second, in diagnosing the recent situation, the results point to the risk of the financial crisis spreading.
Topic:
Financial Crisis and Economy
Political Geography:
Global Focus

10. Afghanistan After 18 Months: Its Humanitarian, Financial, and Governance Crisis

Author:
Wolfgang Danspeckgruber
Publication Date:
11-2023
Content Type:
Policy Brief
Institution:
Liechtenstein Institute on Self-Determination, Princeton University
Abstract:
The Liechtenstein Institute on Self-Determination (LISD) announces the publication of a new series – The Triesenberg Papers – and presents the first installment, entitled: “Afghanistan after 18 Months: Its Humanitarian, Financial, and Governance Crisis.” The paper is available to download here. Key findings of this first Triesenberg Paper demonstrate that the Taliban expects the international community to continue financial and humanitarian assistance as well as to provide food for more than 28 million Afghans, while it apparently keeps enriching itself through taxation (almost $2 billion in 2022), as well as sales of arms, natural resources, and drugs. Afghanistan under Taliban rule is the world’s only country with complete gender apartheid and oppression of girls and women. The paper argues that the Taliban must not be (economically) successful because this can contribute to regional instability and inspire radical (Islamic) forces elsewhere to follow this model in trying to create similar repressive states. It reiterates that Afghanistan has once again become a pawn in the great power game—including Russia, Pakistan, India, China, and others, with tensions between India and China looming large—while Taliban policies and ambitions are being instrumentalized. The paper warns that ignoring the plight of the Afghans in our crisis-prone world increases the existing problems and resulting security risks particularly for Afghanistan’s neighborhood and Europe, by permitting Afghanistan to become a hornet’s nest for international terrorism. The paper proposes concrete steps on how to move forward constructively. The Triesenberg Papers are a new publication series edited by Wolfgang Danspeckgruber and published through the Liechtenstein Institute on Self-Determination at Princeton University. Subjects emanate from the Liechtenstein Colloquia on European and International Affairs (LCM) as well as other specialized meetings on critical topics in contemporary geopolitics, communal relations, security, technology, society, and cultural-religious issues. The LCM have been active since 1989. The meetings and publications seek to produce meaningful, non-polemic, analytical and substantial analysis and to develop innovative and sustainable solutions.
Topic:
Financial Crisis, Governance, Taliban, and Humanitarian Crisis
Political Geography:
Afghanistan and South Asia

11. Recessions, the energy mix and environmental policy

Author:
Pragyan Deb, Davide Furceri, Jonathan Ostry, and Nour Tawk
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
How do severe recessions, such as those brought about by the Global Financial Crisis or the COVID-19 pandemic, affect the composition of energy generation between green and dirty sources? Does creative destruction during recessions result in a sustained greening of the energy mix? The empirical analysis presented in this paper highlights that recessions and crises result in permanent, albeit small, increases in energy efficiency and in the share of renewables in total electricity. These effects are larger, however, when complemented with strong environmental policies – both market-based measures such as taxes on pollutants, trading schemes and feed-in-tariffs, and non-market measures such as emission and fuel standards and R&D investment and subsidies – that incentivise and hasten the transition towards renewable sources of energy.
Topic:
Environment, Financial Crisis, Electricity, Renewable Energy, Energy, and Recession
Political Geography:
Global Focus

12. The Cyclical Behaviour of Fiscal Policy During the Covid-19 Crisis

Author:
Philipp Heimberger
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This paper analyses the cyclicality of fiscal policy (discretionary versus automatic) for 28 advanced economies over 1995-2021 by paying special attention to the Covid-19 crisis. We find evidence that discretionary fiscal policy during the Covid-19 crisis (2020-2021) was significantly more countercyclical than before – in particular in the Eurozone. We do not find comparable evidence for more counter-cyclicality during the financial crisis or Euro crisis, which lends support to the argument that discretionary fiscal policy responded especially forceful to stabilise the economy during the Covid-19 crisis. Furthermore, automatic fiscal stabilisers contributed significantly to counter-cyclical stabilisation, although their performance over 2020-2021 was more in line with the past than for discretionary fiscal policy. Overall, fiscal policy in non-Eurozone advanced countries is more countercyclical than in the Eurozone. However, the cyclicality varies markedly across countries. Our findings shed light on how the cyclical behaviour of fiscal policy varies across countries and time.
Topic:
Financial Crisis, Crisis Management, Fiscal Policy, COVID-19, and Euro
Political Geography:
Europe

13. The European Banks’ Role in the Financial Crisis of 2007-8: A Critical Assessment

Author:
Photis Lysandrou
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
Since the outbreak of the financial crisis in 2007, opinion has been divided over whether its root cause was credit arbitrage or safe asset demand. New research on the European banks' role in the crisis may finally help to resolve the issue. Far from being peripheral players in the crisis, European banks were deeply implicated in its causal origins as evidenced by their activities in the two US debt markets that were at the heart of the crisis: those for collateralised debt obligations (CDOs) and for asset backed commercial paper (ABCP). These activities would seem to lend weight to the credit arbitrage story, a conclusion that has been reached by several authors. However, it is a conclusion only made possible by ignoring the connection between the federal funds rate and the rate of ABCP demand from the institutional money market mutual funds (MMMFs) in the pre-crisis era. This paper argues that when this connection is closely examined, it turns out that the evidence surrounding the European banks' role in the financial crisis gives greater weight to the safe asset demand explanation of the crisis.
Topic:
Markets, Financial Crisis, Banks, Debt Securities, Assets, and Federal Funds Rate
Political Geography:
Europe and United States of America

14. Argentina 20 Years After La Crisis del 2001

Author:
María Félix Herrera and María Félix Herrera
Publication Date:
04-2022
Content Type:
Commentary and Analysis
Institution:
The North American Congress on Latin America (NACLA)
Abstract:
As the government closed a new agreement with the International Monetary Fund, Argentine societyrevisited painful memories from its biggest financial crisis in recent history.
Topic:
Financial Crisis, Economy, and IMF
Political Geography:
Argentina and South America

15. 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

16. The Cyclical Behaviour of Fiscal Policy During the Covid-19 Crisis

Author:
Philipp Heimberger
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This paper analyses the cyclicality of fiscal policy (discretionary versus automatic) for 28 advanced economies over 1995-2021 by paying special attention to the Covid-19 crisis. We find evidence that discretionary fiscal policy during the Covid-19 crisis (2020-2021) was significantly more countercyclical than before – in particular in the Eurozone. We do not find comparable evidence for more counter-cyclicality during the financial crisis or Euro crisis, which lends support to the argument that discretionary fiscal policy responded especially forceful to stabilise the economy during the Covid-19 crisis. Furthermore, automatic fiscal stabilisers contributed significantly to counter-cyclical stabilisation, although their performance over 2020-2021 was more in line with the past than for discretionary fiscal policy. Overall, fiscal policy in non-Eurozone advanced countries is more countercyclical than in the Eurozone. However, the cyclicality varies markedly across countries. Our findings shed light on how the cyclical behaviour of fiscal policy varies across countries and time.
Topic:
Financial Crisis, European Union, Fiscal Policy, and COVID-19
Political Geography:
Europe

17. Lebanon in Crisis

Author:
Randa Slim and Edward M. Gabriel
Publication Date:
03-2022
Content Type:
Video
Institution:
Middle East Institute (MEI)
Abstract:
Randa Slim and Amb. Edward Gabriel discuss the daunting trifecta of economic, financial, and political crises Lebanon currently faces and what they anticipate for the country's future.
Topic:
Financial Crisis, Political Crisis, and Economic Crisis
Political Geography:
Middle East and Lebanon

18. COVID-19 and the Health of Banking Sector in Japan and South Korea: A Comparative Study

Author:
Munim Kumar Barai
Publication Date:
07-2022
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
The economies of Japan and South Korea are dominated by banks. Both countries have created a complex financial structure, including a well-established banking industry at their heart that supports economic operations. However, both countries’ banking sectors have previously faced crises such as the Asian Financial Crisis (mostly in South Korea), the Japanese economic slowdown, and the financial crisis of 2007-08 (both). While the Bank of Japan (BOJ) approved the quantitative easing (QE) monetary policy and lowered interest rates to manage the crises, the Bank of Korea (BOK) pursued interest and financial restructuring as well as banking system digitization to overcome the crises. Covid-19 has disrupted the normal operation of banks, and the central banks and governments of both countries have implemented a variety of monetary and other measures to mitigate its economic and financial consequences. This study aims to identify and assess the health of domestic banks in Japan and South Korea for the Covid-19 ex-ante and interim periods. Several important variables, i.e., portfolios of assets and liabilities, asset productivity, stockholders' equity, profitability, and operating efficiency, have been included to evaluate the health of their banks. This compari-son of health metrics for 2010 to 2020 could help identify changes or shifts in the banking sector of Japan and Korea. The study has used ex-ploratory and descriptive methodologies to undertake qualitative and quantitative evaluations of important bank health indicators in the ex-ante and interim periods of Covid-19. It also used a hybrid method to produce research goals and arguments, including a framework based on what was already known in the field.
Topic:
Financial Crisis, Economy, COVID-19, and Banking
Political Geography:
Japan, Asia, and South Korea

19. 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

20. 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