1,720,979 research outputs found
"Should Banks Be "Narrowed"? An Evaluation of a Plan to Reduce Financial Instability"
Full text linkIn this issue, Biagio Bossone of the IMF evaluates narrow banking from the perspective of modern theories of financial intermediation. These theories portray the status quo banking system as a solution to otherwise intractable problems of imperfect information, risk, and even moral hazard. The system's characteristic coupling of liquid liabilities with illiquid assets-seen by some as an undesirable "mismatch"? in fact contributes greatly to the efficiency of the economy. Bossone argues that these efficiency gains outweigh the disadvantages associated with the existing legal framework.
Money, politics and a future for the international financial system
Full text linkIn developing the architecture for a financial system, the challenge is to combine deregulation and safety nets against systemic failure with effective prudential regulation and oversight. The author analyzes three approaches to choosing an adequate regulatory framework for a financial system. a) Those most worried about panic and herd behavior tend to favor relatively extensive controls on financial institutions'activities, including controls on interest rates and on the volume and direction of lending. b) Those most concerned about moral hazard advocate abolishing controls and safety nets, seeing the solution is stronger market discipline and reduced powers and discretion for regulators. c) Mainstream opinion advocates a mix of measures, to both strengthen market discipline and improve regulatory oversight. The approach a county opts for depends on 1) which monetary and exchange rate regime it chooses, 2) whether it is more concerned about moral hazard or about panic and herd behavior, and 3) how the politics of reform shape its solutions. The author suggests a scenario for development of the global financial system over the next two or three decades that assumes that the final outcome will resemble the market solution - not because that is the optimal policy choice but because of how political weakness will interact with advances in settlement technology. In the author's scenario, the world moves toward a monetary system in which fixed exchange rate systems or de facto currency competition limit the power of central banks. This limits options for discretionary and open-ended liquidity support to help deal with systemic financial crises. The costs of inflexible exchange rates are moderated by new types of wage contracts, using units of account that are correlated with the shocks a particular industry or kind of contract faces -- thus maintaining the positive aspects of monetary systems with flexible nominal exchange rates. Mistrust in monetary authorities and the emergence of private settlements lead to a return of asset-backed money as the means of payment. The disciplines on financial systems come to resemble somewhat those of historical"free banking"systems, with financial institutions requiring high levels of equity and payments systems protected only by limited, fully funded safety nets.Banks&Banking Reform,Fiscal&Monetary Policy,Financial Intermediation,Payment Systems&Infrastructure,Economic Theory&Research,Banks&Banking Reform,Economic Theory&Research,Macroeconomic Management,Financial Intermediation,Financial Economics
In Finance, Size Matters
Full text linkThis study investigates the relationship between production efficiency in financial intermediation and financial system size. The study predicts and tests for the existence of "systemic scale economies" (SSE) effects, whereby value-maximizing intermediaries operating in large systems are expected to have lower costs of production, risk absorption, and reputation signaling than intermediaries operating in small systems. The study explores the mechanics of SSEs and estimates their quantitative relevance using a large cross-country banking data panel. The study shows strong evidence in support of SSEs and finds that the institutional environment, risk environment, and market concentration affect significantly the production efficiency of financial intermediation services. Copyright 2004, International Monetary Fund
Does corruption relieve foreign investors of the burden of taxes and capital controls?
Full text linkIn a sample of fourteen source countries making bilateral investments in forty five countries, the author finds that taxes, capital controls, and corruption, all have large, statistically significant negative effects on foreign investment. Moreover, there is no robust support in the data for the"efficient grease"hypothesis - that corruption helps attract foreign investment by reducing firms'tax burden and the irritant of capital controls.International Terrorism&Counterterrorism,Capital Markets and Capital Flows,Decentralization,Fiscal&Monetary Policy,Economic Theory&Research,Economic Theory&Research,International Terrorism&Counterterrorism,Governance Indicators,National Governance,Capital Flows
International Regulation of Export Taxes: Development Tools or Inefficient Trade Instruments?
No full textExport taxes are commonly imposed by commodity producers, most of whom are developing countries, in order to promote the development of downstream processing industries, to encourage foreign direct investments, to stabilise export earnings, but also to protect natural resources and the environment. Besides, export taxes are a major source of government revenue in developing countries. Export taxes do not seem to be prohibited in the WTO and any attempt to regulate them during the Doha Development Round has met with strong opposition by developing countries.
The situation is actually rather different in the framework of regional trade agreements being negotiated by the European Union with developing countries. In particular, the European Partnership Agreements contain provisions whereby ACP State(s) shall not introduce new export taxes or increase those already applied. EPAs also provide for the possibility to introduce temporary export taxes in exceptional circumstances. The analysis of the regime of export taxes applied in regional trade agreements with developing countries can provide a different perspective to discuss questions (such as the policy space for development, the special and differential treatment, the relationship between regional and multilateral system, the tension between trade and industrial interests and the commitment towards developing countries) which are usually debated with reference to the more classical market access issu
The G-20 at the UN ECOSOC: A Complementary Perspective
No full textThis paper proposes how to combine the G20 with the United Nations (UN) institutional system. Namely, it advocates enhanced capacities of the ECOSOC within global economic governance in order to open new prospects for the G20 presence at the ECOSOC pursuant to a teleological interpretation and application of the UN Charter, i.e. an interpretation and application of the Charter in light of UN purposes and principles. Particular attention is paid in Chapters IX and X to "International Economic and Social Co-operation" and "Economic and Social Council" respectively
Legitimacy and Effectiveness of Global Economic Governance: Rethinking Traditional Premises against the Complexity of Present
No full text
Addressing the education puzzle : the distribution of education and economic reform
Full text linkNo country has achieved sustained economic development without substantially investing in human capital. Previous studies have shown the handsome returns to various forms of basic education, research, training, learning-by-doing, and capacity-building. But education by itself does not guarantee successful development, as history has shown in the former Soviet bloc, Sri Lanka, the Philippines, and the Indian states of Kerala and West Bengal. The question is, when and how does education bring high payoffs? Although theory has suggested a strong causal link between education and growth, the empirical evidence has not been unanimous and conclusive. The authors examine two explanatory factors. First, who gets educated matters a good deal, but the distribution of education is complex and not much has been written about it. They construct an asset allocation model that elucidates the importance of the distribution of education to economic development. Second, how education affects growth is greatly affected by the economic policy environment. Policies determine what people can do with their education. Reform of trade, investment, and labor policies can increase the returns from education. Using panel data from 12 Asian and Latin American countries for 1970-94, they investigate the relationship between education, policy reform, and economic growth. Their empirical results are promising. First, the distribution of education matters. Unequal distribution of education tends to have a negative impact on per capita income in most countries. Moreover, controlling for human capital distribution and the use of appropriate functional form specifications consistent with the asset allocation model makes a difference for the effect of average schooling on per capita income. Controlling for education distribution leads to positive and significant effects of average schooling on per capita income, while failure to do so leads to insignificant, even negative effects, of average education. Second, the policy environment matters a great deal. Our results indicate that economic policies that suppress market forces tend to dramatically reduce the impact of human capital on economic growth. Investment in human capital can have little impact on growth unless people can use education in competitive and open markets. The larger and more competitive these markets are, the greater are the prospects for using education and skills.Curriculum&Instruction,Economic Theory&Research,Decentralization,Public Health Promotion,Health Monitoring&Evaluation,Health Monitoring&Evaluation,Teaching and Learning,Curriculum&Instruction,Economic Theory&Research,Gender and Education
Information, accounting, and the regulation of concessioned infrastructure monopolies
Full text linkEconomists often characterize the regulation of monopolies as a"game"(between the regulator and the service provider) in which the two players do not share the same information. The regulator is assumed to have poorer information than the service provider about the scope of future efficiency gains and the size and timing of future investment plans. Over time, the regulator must increase its information base so that regulatory targets become more realistic - but this is a costly process. The authors examine the ways such information can and should be generated, especially throughthe accounting requirements a regulator can impose on private operators of infrastructure concessions. (They view concessioning and regulation as complementary, not substitute, activities.) Concessionaires should provide regulators with the information they need to: 1) Compare outcomes with expectations. 2) Evaluate the cost of adverse shocks that may warrant relaxed regulations. 3) Evaluate whether lower costs than expected are the result of better performance or diminished output. 4) Properly evaluate the asset base and charge for the consumption of capital. Information that regulators get from private operators of infrastructure monopolies should be used to make both regulators and concessionaires accountable. In Chile, for example, the privatization of monopolies led to significant efficiency gains, but it took a long time for these gains to be passed on to users because neither the firms nor the regulators were held accountable - until Congress expressed reluctance to endorse further privatization because earlier waves of privatization had not benefited consumers. In other words, information should be used to make regulatory decisions more transparent and to reduce the risk of the private providers"capturing"the regulators.Labor Policies,International Terrorism&Counterterrorism,Environmental Economics&Policies,Economic Theory&Research,Decentralization,Financial Intermediation,Environmental Economics&Policies,Economic Theory&Research,International Terrorism&Counterterrorism,Banks&Banking Reform
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