The 2011 World development report looks across disciplines and experiences drawn from around the world to offer some ideas and practical recommendations on how to move beyond conflict and fragility ...and secure development. The key messages are important for all countries-low, middle, and high income-as well as for regional and global institutions: first, institutional legitimacy is the key to stability. When state institutions do not adequately protect citizens, guard against corruption, or provide access to justice; when markets do not provide job opportunities; or when communities have lost social cohesion-the likelihood of violent conflict increases. Second, investing in citizen security, justice, and jobs is essential to reducing violence. But there are major structural gaps in our collective capabilities to support these areas. Third, confronting this challenge effectively means that institutions need to change. International agencies and partners from other countries must adapt procedures so they can respond with agility and speed, a longer-term perspective, and greater staying power. Fourth, need to adopt a layered approach. Some problems can be addressed at the country level, but others need to be addressed at a regional level, such as developing markets that integrate insecure areas and pooling resources for building capacity Fifth, in adopting these approaches, need to be aware that the global landscape is changing. Regional institutions and middle income countries are playing a larger role. This means should pay more attention to south-south and south-north exchanges, and to the recent transition experiences of middle income countries.
Abstract
This paper provides quantitative modelling of the effect of three longer-term global transitions: the global demographic transition involving a marked reduction in population growth; a ...long-term slowdown in productivity growth which may continue, or may conceivably be reversed; and the disruption in the global economy due to increasing climate shocks and the implementation of climate policies that will be needed to reach net-zero emissions by 2050. We study the global investment needs to which these transitions will lead. We demonstrate that these investment needs will be both asymmetric across countries and over time. This asymmetry will lead to potentially large changes in trade flows and significant financial capital flows across national borders, and also to substantial real exchange changes and interest rate movements. The resulting large movements in international capital flows will have significant implications for the global financial system, which we demonstrate at the country and regional level.
How do international investors adjust their portfolios in response to sovereign risk? We answer this question by combining data on default probabilities for 31 developed and emerging markets with ...monthly data on the portfolios of individual bond mutual funds. We show that bond funds reduce their exposure to a country when sovereign default risk increases, indicating that changes in yields do not fully compensate investors for additional sovereign risk. We find that the magnitude of the response is heterogeneous. Portfolio weights of high-risk countries are more sensitive to sovereign risk, while core developed markets appear to enjoy preferential treatment, with their portfolio weights little affected by sovereign risk. Fund characteristics, such as past performance, also affect sensitivity to sovereign risk. Finally, we document what determines the destination of reallocation flows. Funds shift their assets to countries outside the immediate geographic region while avoiding markets to which they are heavily exposed.
•We study how international investors adjust their portfolios in response to sovereign risk.•Bond funds reduce their exposure to a country when sovereign default risk increases.•Portfolio weights of high-risk countries are more sensitive to sovereign risk.•Core developed markets enjoy preferential treatment, unaffected by sovereign risk.•Funds shift their assets to countries outside the immediate geographic region.
•New methodology for detecting transaction use of crypto in off-chain exchanges.•Demonstrates that large fraction of trades represent international capital movements.•Data covers several hundred ...million transactions for over 160 countries.•First study to focus on exchanges where roughly 90% of crypto trades take place.
This paper employs high frequency transactions data on the world's two oldest and most extensive centralized peer-to-peer Bitcoin markets, enabling trade in the currencies of more than 160 countries. We develop an algorithm that allows us, with high probability, to detect “crypto vehicle transactions” in which crypto currency is used to move capital across borders, and/or to exchange one fiat currency for another. The data suggest that the use of Bitcoin has become an increasingly important channel to receive remittances and evade capital controls in emerging markets. Two event studies on Venezuela and Argentina provide supporting evidence.
Migration and sovereign default risk Alessandria, George; Bai, Yan; Deng, Minjie
Journal of monetary economics,
08/2020, Letnik:
113
Journal Article
Recenzirano
•Sovereign debt crises feature spiking spreads, economic decline, and capital and worker outflows.•Develop sovereign default model with migration choice and capital accumulation.•Model replicates ...spread, GDP, investment, trade balance, and emigration dynamics in Spanish debt crisis and recovery.•Emigration key reason for lack of recovery in aggregate GDP after Spanish debt crisis.•Even though migration amplifies sovereign debt crises, workers gainfrom migration option.
During sovereign debt crises, countries experience persistent economic declines, spiking spreads, and outflows of capital and workers. To account for these salient features, we develop a sovereign default model with migration and capital accumulation. The model has a two-way feedback. Default risk lowers workers’ welfare and induces emigration, which in turn intensifies default risk by lowering tax base and investment. Compared with a no-migration model, our model produces higher default risk, lower investment, and a more profound and prolonged recession. We find that migration accounts for almost all of the lack of recovery in GDP during the recent Spanish debt crisis.
The article attempts to identify new trends in approaches to assessing the impact of uncontrolled international capital flows on the development of the national economy and the corresponding changes ...in regulatory policies. It is pointed out that uncontrolled capital flows pose a special threat to small open economies due to insufficient development of the institutional environment and low depth of financial markets. There has been constructed circle of typical for small open economies risks, conducted with uncontrolled capital flows movement, such as deepening structural imbalances in financial asset markets, undesirable excessive fluctuations in the national currency rate, the flight of national capital and the erosion of the tax base. Based on the analysis of recent research, international regulatory initiatives of EU countries, recommendations of international development institutions and IMF’s Integrated Policy Framework, have been identified such trends as strengthening control over illegal capital flows, limiting of the negative speculative influence, panic and herd behaviour on exchange rate stability. Argued for a very important role which plays an uncontrolled dynamics of national currency rate on the transmission of global shocks to national economies. This necessitates a serious overhaul of exchange rate policy approaches. Central banks of small open economies should consider exchange rate stability as one of their goals. This does not mean inflation targeting abandon. The use of the instrument of currency interventions helps to influence the achievement of external targets, increasing the ability of interest rate policy instruments to achieve inflation targeting in the domestic market as well. As a conclusion and proposals for further development of policies in the financial sector to ensure the sustainable development of small open economies is systematized a list of possible regulatory measures. It is emphasized that the development of regulatory policies in the monetary and financial spheres in small open economies, which includes Ukraine, should be implemented comprehensively and include the development of macroprudential tools to limit systemic risk factors, suppress illicit capital flows and reduce the role of psychological factors of pro-cyclical behavior. The implementation of regulatory measures on transparent terms in such spheres will not make free-market self-regulatory mechanisms weaken, but rather helps to release them.
Questo tributo commemora Salvatore Biasco, illustre collega e amico della rivista. I molteplici contributi di Biasco hanno spaziato dall’economia internazionale alla finanza, passando per l’impegno ...politico in prima persona. Il lavoro di Biasco ha sempre sottolineato il ruolo centrale della politica economica ma anche la sua natura endogena. In contrasto con le teorie dominanti che attribuiscono le fluttuazioni economiche e le crisi a fattori esterni, Biasco considerava problematica l’idea di un equilibrio stabile di mercato. Il lavoro di Biasco ha gettato luce sull’importante impatto delle variabili finanziarie su quelle reali, ad esempio con articoli sull’endogenità dei cicli valutari e sull’importanza dei flussi lordi di capitali nel sistema monetario internazionale.
Credit ratings given to countries by credit rating agencies have the potential to direct international capital flows by influencing investors' investment decisions. In this study the credit ratings ...given for Turkey by three major international credit rating agencies Standard & Poor's, Moody's and Fitch impact on foreign direct investment and portfolio investments was investigated with Johansen cointegration method and ARDL (Autoregressvive Distributed Lag) method that is based on limit test approach for 1998: Q1-2019: Q3 period. As a result of the analysis, no significant relationship was determined between credit ratings and foreign direct investments while the effect of credit ratings on portfolio investments was found significant and positive. Although credit ratings positively affect portfolio investments, the impact degree is quite weak. The resulting analysis findings indicate that credit ratings given to Turkey are not a sufficient and effective enough factor in directing capital flows.
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