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The main fault of economic system is the systemic poverty. In the systemic poverty there is no lack of goods and services but lack of the right to access them (money). The systemic poverty is increasing. In UK the recent (2021) direct poverty is 17% and the indirect 50% In Greece the direct is 30% and the indirect far above 50%. The systemic poverty creates increased suicides, poor health, inability to make a family, reduced span of life, etc. The systemic poverty can be considered a systemic crime too. The United Nations in the recent years has declared a planetary scale campaign to eradicate poverty from the planet. The systemic poverty can be cure though the free basic income. The free basic income is unfortunately not possible to be derived solely from taxes as it is a too large expense for Governments, so it has to be derived directly from currency issuing by the central bank. But in the Maastricht agreement there is an article-term that prohibits the Governments not only to demand but even to advise the central bank about issuing and circulating currency. In this article we analyze the ability of the monetary-banking system, to support the free basic income that eliminates poverty without creating periodically debt-crises. We discover 5 toxic and anti-democratic functions of the banking monetary system that create periodically debt crises. They are analyzed in the text under the terms 1) Forced preemptive control of money issuing, (monetary despotism) 2) The forced proprietary monopoly of the issuing of the public currency, in the case of private national central banks 3) Macroeconomic statistical enforcement of debt. 4) Empty-lending (accounting money M1,M2,M3) , 5) For the commercial banks ,money-issuing middleman main role. By democratizing top-down the monetary system though joined political will in the Eurozone after changing the Maastricht agreement not only periodically debt-crises are not created but also the free basic income can be granted. Alternatively, the poverty may be eliminated with the free basic income through bottom-up alternative decentralized non-banking digital local or global currencies. The bitcoin hardly qualifies anymore as an alternative currency that grants the free basic income. Thus new designs of digital currencies are required. We state the necessary principles for such currencies (governmental or not) and we give 2 examples of them, inspired from existing local alternative digital currencies in Italy and Germany, which are fully taxed within the old banking currencies. Archives of Economic History , Vol XXXIII, No 2 July-December 2021

Episodes of debt accumulation have been a recurrent feature of the global economy over the past fifty years. Since 2010, emerging and developing economies have experienced another wave of historically large and rapid debt accumulation. Similar past debt buildups have often ended in widespread financial crises in these economies. This paper examines the factors that are likely to determine the outcome of the most recent debt wave, and considers policy options to help reduce the likelihood that it ends again in widespread crises. It reports two main results. First, the rapid increase in debt has made emerging and developing economies more vulnerable to shifts in market sentiment, notwithstanding historically low global interest rates. Second, policy options are available to lower the likelihood of financial crises, and to help manage the adverse impacts of crises when they do occur. These include sound debt management, strong monetary and fiscal frameworks, and robust bank supervision and regulation. The post-crisis debt buildup has coincided with a period of subdued growth as well as the emergence of non-traditional creditors. As a result, policy priorities also need to ensure that debt is spent on productive purposes to improve growth prospects and that all debt-related transactions are transparently reported.

During the nineteenth century, sovereign debt defaults led to active intervention by governments from creditor countries to defend the claims of their bondholders. In certain cases, these interventions triggered the imposition of foreign control through commissions formed by States' and bondholders' representatives. This chapter investigates why foreign control episodes were mostly absent in Latin America despite its recurrent debt crises. We focus on two case studies from the mid-nineteen century, Mexico and Peru, and analyze how public and private control was pursued to secure debt repayment and the development of international trade. Even though the British government was reluctant to intervene, major merchant banks could heavily influence the fiscal and commercial policies of countries with European commercial relations. However, the resumption of debt service in the aftermath of a default depended upon a complex set of political and economic factors.

Is the seniority structure of sovereign debt neutral for a government's decision between defaulting and raising surpluses? In this paper, we address this question using a model of debt crises where a discretionary government endogenously chooses distortionary taxation and whether to apply an optimal haircut to bondholders. We show that when the size of senior tranches is small, a version of the Modigliani-Miller theorem holds: tranching just redistributes government revenues from junior to senior bondholders, while taxes and government borrowing costs remain unchanged. However, as senior tranches become sufficiently large, default costs on senior debt transpire into a stronger commitment to repay not only the senior tranche, but also the junior one. We show that there is a lower threshold for senior bonds above which tranching can eliminate default on both junior and senior debt, and an upper threshold beyond which the government defaults also on senior debt. The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.

How does the change in the creditworthiness of a financial institution or sovereign impact its creditors’ solvency? I address this question in the context of the recent European sovereign debt crisis. Considering the network of Eurozone member states, interlinked through investment cross-holdings, I model default as a multi-stage disease with each credit-rating corresponding to a new infection phase, then derive systemic importance and vulnerability indicators in the presence of financial contagion, triggered by the change in the creditworthiness of a network member. I further extend the model to analyse not only negative, but also positive credit risk spillovers.

Clanek se zabýva provaděnou hospodařskou politikou v Chile v době diktatury generala Pinocheta. Toto obdobi je do soucasnosti kontroverzni jak pro chilskou spolecnost, tak pro vnějsi pozorovatele. Tato perioda je vsak na druhou stranu mimořadně zajimava, protože se v ni podařilo položit zaklady pro stabilni hospodařský i politický rozvoj v naslednem obdobi. Clanek nejdřive kratce nastiňuje zakladni charakteristiky chilske spolecnosti a hospodařstvi. Nasledně se věnujeme politickemu vývoji, a to vcetně předchoziho Allendeho obdobi. Kroky Allendeho vlady v hospodařske oblasti jsou potom popsany v samostatne kapitole. Tato charakteristika je zcela nezbytna pro pochopeni souvislosti uchopeni moci vojenskou klikou, protože Allendeho vladě se v kratkem casovem horizontu podařilo zcela rozvratit hospodařstvi země. Skutecnost, že se vojaci chopili v roce 1973 moci, tak může být vnimana jen jako zachrana před totalnim kolapsem cele ekonomiky. Vojaci byli nuceni v prve řadě stabilizovat hospodařstvi. To, co jejich obdobi vlady ovsem cinni výjimecným, je, že se pustili do strukturalnich reforem, ktere mnohdy drastickou cestou redukovaly statni zasahy do ekonomiky - doslo k deregulacim na trhu prace, privatizaci, změně daňove soustavy, k přechodu na fondový důchodový system a podobně. Toto usili bylo naruseno dluhovou krizi, ktera zasahla Chile stejně jako ostatni země regionu na pocatku 80. let. Vojaci na danou situaci reagovali (docasným) zvýsenim statnich zasahů do ekonomiky. Hospodařska situace se uklidnila po roce 1984 a dale nasledovalo obdobi silneho hospodařskeho vzestupu. Zhodnotime-li cele obdobi Pinochetovy diktatury, pak je zřejme, že se v tomto obdobi podařilo hospodařstvi stabilizovat a bylo předano demokraticky zvolene vladě ve velmi dobrem stavu - Chile byla v roce 1990 nejstabilnějsi a nejotevřenějsi zemi celeho regionu. Tato skutecnost pak měla vliv na pozitivni hospodařske výsledky v nasledujici dekadě. I tento přispěvek tak přispiva ke kontroverznimu hodnoceni celeho obdobi vojenske diktatury. Je zřejme, že vojenský režim poslapaval lidska prava v zemi, ale na druhou stranu se vojenske vladě podařilo ozdravit chilske hospodařstvi natolik, že ani hluboke měnove turbulence v sousednich zemich (Brazilie a Argentina) na přelomu tisicileti nevyvolaly v zemi važnějsi hospodařske problemy.

"Published online: 15 Aug. 2014", Using a panel of developed and developing countries and data for the period 1980 to 2005, we find that debt crises trigger financial reforms.We also show that (i) when general economic conditions deteriorate, financial reforms become more likely to take place; (ii) IMF-stabilization programmes and sovereign debt restructurings favour the implementation of financial reforms; and (iii) the quality of economic institutions strongly boosts financial reforms., COMPETE, QREN, FEDER, Fundação para a Ciência e a Tecnologia (FCT)

This paper outlines a long-term policy and institutional framework for reducing the intensity of recessions, debt crises and financial instabilities, especially for the Core nations and areas that bore the brunt of the anomalies during 2008-2013. We argue that institutional changes need to be systemic, amounting to the construction of a new social structure of accumulation (SSA) or mode of regulation (MOR), which we call an SSA of embedded communitarian liberalism. Five institutional spheres are introduced which are in need of systemic change, due to the entrenched contradictions and problems which the current set of institutions generate. These involve firstly institutions within the world-system of finance and production; secondly relating to finance versus industry; thirdly capital versus labor; fourthly state systems of production; and fifthly the interlinking of state, community and ecology.

This paper presents a systematic analysis of the availability and use of fiscal space in emerging and developing economies. These economies built fiscal space in the run-up to the Great Recession of 2008-09, which was then used for stimulus. This reflects a more general trend over the past three decades, where availability of fiscal space has been associated with increasingly countercyclical (or less procyclical) fiscal policy. However, fiscal space has shrunk since the Great Recession and has not returned to pre-crisis levels. Emerging and developing economies face downside risks to growth and prospects of rising financing costs. In the event that these cause a sharp cyclical slowdown, policy makers may need to employ fiscal policy as a possible tool for stimulus. An important prerequisite for fiscal policy to be effective is that these economies have the necessary fiscal space to employ countercyclical policies. Over the medium-term, credible and well-designed institutional arrangements, such as fiscal rules, stabilization funds, and medium-term expenditure frameworks, can help build fiscal space and strengthen policy outcomes.

The papers in this series aim to provide a vehicle for publishing preliminary results on Macroeconomics and Fiscal Management (MFM) topics to encourage discussion and debate. This paper explores two new financing mechanisms that multilateral and bilateral development agencies could consider deploying to address problems of debt sustainability in small states. In this paper the authors provide an initial assessment of these proposals, informed by analysis of small state indebtedness and recent debt dynamics. Proposed financing instruments are predicated on assumptions that small states face high levels of indebtedness, and that reducing debt levels while increasing climate resilience could sustainably reduce such vulnerabilities. The authors find that levels of indebtedness vary widely across small states. Analysis of small state debt dynamics shows that small state debt accumulation has been driven by large primary and current account deficits and slow economic growth. Debt reduction from new mechanisms can only be expected to be sustainable, therefore, if countries simultaneously address the macroeconomic imbalances driving debt accumulation. The authors demonstrate that, while exposure to natural disasters is likely to have exacerbated economic management challenges in some small states, such exposures are unlikely to be the only important cause of indebtedness. The authors conclude that proposed new financing instruments can potentially help reduce small state debt burdens and gain fiscal space for climate adaptation but will not present a sustainable solution to problems of small state debt risks unless they involve macroeconomic and structural reforms to address the underlying imbalances driving rapid debt accumulation.

The global financial crisis of 2007/08 uncovered the need to integrate financial- and credit market frictions into macroeconomic models. This dissertation contributes to this research agenda by modelling and quantifying the role of financial market frictions in different topics in open economy macroeconomics through three essays. The first essay provides a quantitative assessment of financial market frictions in emerging economies. It asks which frictions and which shocks are most suitable for the explanation of emerging market business cycle data? The contribution is to develop and estimate a quantitative business cycle model of a small-open economy with a leveraged and capital importing banking sector. Further, I model financial sector shocks which capture the idea of a sudden change in investor preferences in a reduced form. Using Mexican quarterly data in a Bayesian estimation approach, I find that financial sector shocks play a more important role compared to shocks to the foreign interest rate in the determination of investment and trade dynamics, in particular after the global financial crisis. Further, the financial accelerator related to bank balance sheets jointly with financial sector shocks contribute to the procyclicality of capital flows. The second essay, which is joint work with Philipp Engler, asks how some advanced economies have become vulnerable to a simultaneous banking and sovereign debt crisis? The contribution is that we analyse the liquidity role of government debt for bank funding in a quantitative framework. We find that dynamics in sovereign risk premia and secured interbank intermediation during the European sovereign debt crisis can be captured by the concept of strategic default. While the high default penalty from a credit crunch extends the endogenous borrowing limit of an advanced economy such that higher debt levels are achieved, the recession following an unorderly sovereign default are more persistent due to the subsequent necessary reparations of bank balance sheets. The third essay contributes to the explanation of excessive returns on sovereign debt in the course of the European sovereign debt crisis. Specifically, I show in an empirical analysis that yields on sovereign CDS contracts are positively affected by forecast disagreement about future GDP growth, a conventional proxy for macroeconomic uncertainty. I then build a simple model of optimal sovereign default in which international investors are ambiguity averse. Investors preferences are captured by multiple-prior utility, where the interval of priors under consideration is affected by uncertainty shocks. I find that uncertainty shock raises the cost for issuing public debt, which in turn distorts the optimal fiscal policy and default decision of the government. Within a crisis zone, uncertainty shocks may lead to non-fundamental default events. In a quantitative evaluation, the model attributes a sizeable share of sovereign yields to time-varying uncertainty., Die Finanzmarktkrise der Jahre 2007/08 hat die Notwendigkeit verdeutlicht, Friktionen an Kredit- und Finanzmärkten in makroökonomische Modelle zu integrieren. Diese Dissertation trägt zu dieser Forschungsagenda bei, indem Finanzmarktfriktionen vor dem Hintergrund drei verschiedener Forschungsfragen kleiner offener Volkswirtschaften modelliert, und deren Bedeutung quantifiziert werden. Der erste Aufsatz liefert eine quantitative Analyse für die Bedeutung von Finanzmarktfriktionen in Schwellenländern. Insbesondere wird der Frage nachgegangen, welche Art von Friktionen und welche Art von Schocks am besten dazu geeignet sind den Konjunkturzyklus von Schwellenländern zu charakterisieren. Mein Forschungsbeitrag besteht darin das neoklassische Standardmodell einer kleinen offenen Volkswirtschaft um einen fremdfinanzierten Finanzsektor zu erweitern, der sich anteilig am internationalen Finanzmarkt finanziert und damit als Intermediär für Kapitalimporte fungiert. Die Modellierung ist an den Ansatz von Gertler, Kiyotaki und Queralto (2012) angelehnt. Darüber hinaus analysiere ich 'Finanzsektor-Schocks', die in reduzierter Form die Idee beinhalten, dass sich die Präferenzen von Investoren ändern, was zu Finanzierungsengpässen für Banken in Schwellenländern führt. Der Charakter eines Finanzsektor-Schocks, der seinen Auslöser innerhalb des Finanzsektors hat (Jermann und Quadrini, 2012) ist damit grundsätzlich zu unterscheiden von der Ansicht, dass der Finanzsektor Schocks lediglich überträgt und gegebenenfalls verstärkt, wie bekannt aus der Literatur zum Finanzakzelerator (Bernanke und Gertler, 1989). Unter Rückgriff auf mexikanische Daten bei der Schätzung des Modells mit bayesianischen Methoden wird gezeigt, dass die Finanzsektor-Schocks eine größere Bedeutung als Zinsschocks aufweisen, um die Dynamik von Investitionen und der Leistungsbilanz zu erklären, insbesondere in Folge der Finanzmarktkrise. Der Finanzakzelerator im Bankensystem zusammen mit den Finanzsektor-Schocks tragen darüber hinaus maßgeblich zur Prozyklizität von Kapitalströmen in Schwellenländern bei. Der zweite Aufsatz behandelt die Frage, woduch entwickelte Länder anfällig werden für ein parallel auftretende Banken- und Staatsschuldenkrise. Dabei stelle ich gemeinsam mit meinem Ko- Autor Philipp Engler in unserer Analyse die Rolle von Staatsanleihen für die Liquidität von Banken in einem quantitativen Modellrahmen heraus. Wir entwickeln ein DSGE Modell mit einer optimalen Rückzahlungsentscheidung der Regierung sowie einem Interbankenmarkt auf dem Staatsanleihen als Sicherheiten dienen. Aus dem Modellaufbau ergibt sich für die Regierung ein Anreiz zur Bedienung der Staatsschulden, da ein Ausfall zu einem Kollaps des Interbankenmarktes führt, mit der Konsequenz einer Kreditklemme und einer tiefen Rezession. Eine Risikoprämie am Interbankenmarkt für besicherte Kredite steigt in den Zeiten an, in denen das staatliche Kreditrisiko sich erhöht. Dadurch verschlechtern sich die Kreditbedingungen, was die Wirkung von negativen Schocks verstärkt. Wir schätzen das Modell mit spanischen Daten und können damit zeigen, dass die Dynamiken staatlicher Risikoprämien und die Kreditintermediation am besicherten Interbankenmarkt während der europäischen Schuldenkrise mit dem Konzept einer strategischen Rückzahlungsentscheidung vereinbar sind. Während die starken Rückzahlungsanreize durch die tiefe Rezession bei einem Staatsausfall durch die einsetzende Kreditklemme zu einer höheren maximalen Staatsverschuldung beitragen, wirken sich die Belastungen eines Staatsbankrotts auf die Bankbilanzen rezessionsverlängernd aus. Der dritte Aufsatz trägt zur Erklärung von überhöhten Zinsen auf Staatsanleihen während der Europäischen Staatsschuldenkrise bei. Ich zeige zunächst in einer empirischen Analyse, dass die Zinsen für Kreditausfallversicherungen ansteigen, wenn die Unstimmigkeit zwischen Konjunkturprognosen bezüglich des BIP-Wachstums im betroffenen Land zunimmt. Die Streuung der Punktschätzer von Wachstumsprognosen stellen ein gängiges Maß für makroökonomische Unsicherheit dar. Auf diesem Zusammenhang aufbauend entwickele ich ein Modell mit optimaler Rückzahlungsentscheidung des Staates, in dem internationale Investoren 'ambiguitätsavers' sind. Diese Agenten besitzen konkurrierende Modelle zur Einchätzung des zukünftigen Verlaufs von Fundamentalwerten in der Makroökonomie, denen sie jedoch keinen Wahrscheinlichkeiten zuordnen können. Damit weichen sie bei der Entscheidungsbildung vom Paradigma der subjektiven Wahrscheinlichkeit ab (Savage, 1954). Die Präferenzen der Investoren werden durch multiple A-priori-Wahrscheinlichkeiten modelliert, bei denen das relevante Intervall für die A-priori-Wahrscheinlichkeit sich durch Unsicherheits-Schocks verändert. Ergebnis der Modellsimulationen ist, dass ein Unsicherheits-Schock die Zinskosten der Staatsfinanzierung erhöht, was die optimale finanzpolitische Entscheidung sowie die Rückzahlungsentscheidung der Regierung verändert. Innerhalb einer Krisenzone können Unsicherheits-Schocks einen nicht durch Fundametalwerte begründeten Staatsbankrott hervorrufen. In der quantitativen Analyse des Modells zeigt sich, dass ein bedeutender Anteil der Risikoprämien auf Staatsanleihen auf makroökonomische Unsicherheit zurückzuführen ist.

Today internet banking is an alternative delivery channel developed by using internet to offer banking services. International banking sector started to use the internet not only as an innovative payment method to increase customer convenience, but also as a way to reduce costs and enhance profits. It is observed that the retail markets have remained essentially national/local and internet banking is gaining wider public acceptance in the EU. Internet banking activities continue to increase in the EU region through the opportunities internet provides for the banking sector as well as its low cost benefits for banks. This paper examines internet banking in the context of the banking sector which has a great importance due to its big effect on the economy of the EU and Balkan countries. Debt-induced economic austerity is destroying the European banking sector which derives no benefit from the borrowed billions but must now make great sacrifices to bail out. In this study, the potential risk of the Sub-Prime banking crisis into a sovereign debt one in Euro area countries is investigated. Nevertheless, the serious threats, which concern Greece and Italy, do not permit us to exclude the occurrence of contagious sovereign debt crises in Euro area in the future. There will be economic pain if the Greeks continue with the euro and there will be economic pain if the Greeks leave the euro.

Mestrado em Controlo de Gestão e dos Negócios Esta tese examina em finanças internacionais o fenómeno da interdependência e contágio nos mercados bolsistas financeiros. Apesar dos efeitos globais de contágio da crise financeira terem sido bem documentadas, bem como os mecanismos de transmissão, em períodos de longo prazo no passado, este estudo assume apenas o período entre 30 de abril de 2012 e o fim do ano 2013. A amostra considerada é dos preços de fecho ajustado dos índices bolsistas, com frequência diária, e abrange o período após crise financeira global e durante a crise da dívida da Zona Euro. Este período é caracterizado pela recuperação do valor das ações, no mercado bolsista dos Estados Unidos, enquanto os governos europeus e BCE, na zona euro, implementam políticas para retomar a confiança no sistema financeiro, causado pela crise de dívida soberana. Esta tese contribui para a literatura através da aplicação da correlação e causalidade à Granger para examinar a integração dos mercados, interdependência e contágio entre índices bolsistas, de países desenvolvidos de mercado. Foi adotado como objeto de estudo, o SP500, no mercado acionista dos EUA e DAX30 (bolsa alemã), FTSE100 (bolsa britânica), FTSEMIB (bolsa italiana), no mercado acionista europeu. Os resultados empíricos sugerem que o mercado acionista dos EUA e do mercado acionista europeu estão correlacionados. Além disso, os resultados sugerem que o mercado acionista dos EUA causa à Granger, na forma unidirecional, os mercados acionistas europeus e o mercado acionista alemão causa à Granger, na forma unidirecional, o mercado acionista britânico. Assim, de acordo com estes resultados, o mercado bolsista dos EUA e europeu estão integrados. Finalmente, há contágio e interdependência, no curto prazo, unidirecional do mercado acionista norte-americano para o mercado acionista europeu e contágio e interdependência unidirecional do mercado acionista alemão para mercado acionista britânico. This thesis examines in international finance the phenomenon of interdependence and contagion in financial stock markets. Even though the global contagion effects of the financial crisis have been well documented as well the transmission mechanism, during long-term period in past, this study assumes only the period between 30th April, 2012 and final year 2013. The sample of stock market prices is close adjusted in daily frequency and covers the period of after global financial crisis and during the Eurozone debt crisis. This period is characterized by the recuperation of stock valuation in US stock market, while the European governments and BCE in Eurozone implement policies to return more confidence in financial system, caused by crises of debt sovereign. This thesis contributes to the literature by applying the correlation and Granger-causality approach to examine the integration of markets, interdependence and contagion between market stocks of developed countries. It was adopted in this study, the SP500 by US stock market and DAX30 (German stock market), FTSE100 (British stock market), FTSEMIB (Italian stock market) by the European stock market. The empirical results suggest that US stock market and European stock market are all correlated. Additionally, the results suggest that US stock market cause à Granger in unidirectional way the European stock markets and the German stock market cause à Granger in unidirectional way the British stock market. So, according these results, US and European stock market are integrated. Finally, there is contagion and interdependence, in short-term, unidirectional of US stock market to European stock market and contagion and interdependence unidirectional of German stock market to British stock market.

Latin America’s historically low saving rates and sub-par growth performance raise the question of whether the region should save more to grow faster. Economists generally resist acknowledging a policy-exploitable causal connection going from saving to growth because domestic saving is perceived to be fully endogenous, optimally determined, or fully substitutable by foreign saving. However, to the extent that these three assumptions do not hold, three channels can be established through which higher domestic saving—by curbing persistent current account deficits—can promote medium-term growth. The channels are first, a real interest rate channel, whereby higher saving reduces the cost of capital and enhances macro sustainability; second, a real exchange rate channel, through which higher saving leads to a more competitive real exchange rate; and third, an endogenous saving channel, whereby saving follows growth and, hence, subsequently compounds the effect of the first two channels. Econometric evidence supports all three channels and suggests that the lower-saving countries in Latin America and the Caribbean, especially those with recurrently weak balance of payments and persistent domestic demand pressures on the non-tradable sector, would benefit the most from boosting their saving rates.

The recent debt crises in Europe and the U.S. states feature similar sharp increases in spreads on government debt but also show important differences. In Europe, the crisis occurred at high government indebtedness levels and had spillovers to the private sector. In the United States, state government indebtedness was low, and the crisis had no spillovers to the private sector. We show theoretically and empirically that these different debt experiences result from the interplay between differences in the ability of governments to interfere in private external debt contracts and differences in the flexibility of state fiscal institutions.

Why did the country that borrowed the most industrialize first? Earlier research has viewed the explosion of debt in 18th century Britain as either detrimental, or as neutral for economic growth. In this paper, we argue instead that Britain’s borrowing boom was beneficial. The massive issuance of liquidly traded bonds allowed the nobility to switch out of low-return investments such as agricultural improvements. This switch lowered factor demand by old sectors and increased profits in new, rising ones such as textiles and iron. Because external financing contributed little to the Industrial Revolution, this boost in profits in new industries accelerated structural change, making Britain more industrial more quickly. The absence of an effective transfer of financial resources from old to new sectors also helps to explain why the Industrial Revolution led to massive social change – because the rich nobility did not lend to or invest in the revolutionizing industries, it failed to capture the high returns to capital in these sectors, leading to relative economic decline.

Main macroeconomic indicators in Morocco (notably economic growth, inflation) are expected to remain appropriate in the short-medium term. Despite negative impacts in the economy due to developments in the Eurozone, in particular sovereign debt crises in Spain and Italy, among other countries, economic growth in Morocco has been positive averaging 4.3 percent per year between years 2010 and 2013. Morocco has displayed important progress in the Bank’s twin objectives of reducing poverty and promoting shared prosperity. Inequality and vulnerability remain important challenges. Despite some notable progress on key human development indicators, Morocco still lags behind in health and education achievements. One of the key challenges for Morocco is that economic growth has not achieved enough employment growth to the needs of a saturated labor market. To achieve faster economic growth, Morocco will need a structural transformation of its economy, with a focus on broadening economic opportunities. Low employment rates in Morocco are largely explained by very low rates of participation of women in the labor force. Most employment creation in Morocco happens in the services and construction sectors, while the agriculture and manufacturing sectors (as these sectors become more productive and substitute labor by capital) actually suffer from net job destruction of approximately 35 thousand jobs per year.

The Sustainable Development Goals, the global development agenda for 2015 through 2030, will require unprecedented mobilization of resources to support their implementation. Their predecessor, the Millennium Development Goals, focused on a limited number of concrete, global human development targets that can be monitored by statistically robust indicators. The Millennium Development Goals set the stage for global support of ambitious development goals behind which the world must rally. The Sustainable Development Goals bring forward the unfinished business of the Millennium Development Goals and go even further. Because of the transformative and sustainable nature of the new development agenda, all possible resources must be mobilized if the world is to succeed in meeting its targets. Thus, the potential for Islamic finance to play a role in supporting the Sustainable Development Goals is explored in this paper. Given the principles of Islamic finance that support socially inclusive and development promoting activities, the Islamic financial sector has the potential to contribute to the achievement of the Sustainable Development Goals. The paper examines the role of Islamic financial institutions, capital markets, and the social sector in promoting strong growth, enhanced financial inclusion, and intermediation, reducing risks and vulnerability of the poor and more broadly contributing to financial stability and development.

In recent years, global imbalances have channeled the excess savings of surplus countries toward the real estate markets of deficit countries. By consequence, the deficit countries that attracted lots of foreign capital experienced large run-ups in house prices while the surplus countries that exported capital exhibited flat or slow house price growth. We argue that international capital flows affect the fiscal policy preferences of both voters and political parties by way of their impact on housing prices. Where capital inflows are large and housing prices are rising, we expect voters to respond by demanding both lower taxes and less publicly-provided social insurance. This is because rising house prices allow homeowners to “self insure” against income losses due to unemployment, illness, and old age. We present survey evidence that supports this claim. Furthermore, we find that responses to house prices are mirrored in capital exporting countries: households become more supportive of both taxes and social insurance as home prices remain flat or decline. Finally, we show that political parties are the mechanisms through which the fiscal preferences of households find policy expression. Taxes and social insurance spending tend to fall (rise) where the right (left) is in power and capital inflows are driving up housing prices. In capital exporting nations, by contrast, we find an attenuation of these partisan fiscal policy outcomes.

How have the politics of banking crises changed over the long run? Unlike existing static accounts, we offer a dynamic theory emphasizing how the emergence of voters’ “great expectations” after the 1930s concerning crisis prevention and mitigation reshaped the politics of banking crises in many democratic countries. We argue that both variations over time, centred on the emergence of these expectations, and variations within democratic countries, based on how veto players constrain policy change, exerted an important influence on the propensity of voters to punish incumbent political parties in the aftermath of banking crises. We find strong support for our argument using a new dataset of 100 democratic countries from 1831 – 2011. Political punishment in the aftermath of a banking crisis is mainly a modern phenomenon and is most evident in systems with polarized veto players.

Passage of the Dodd-Frank financial reform bill, in conjunction with a Supreme Court ruling supporting a Freedom of Information Act request, required the Federal Reserve (Fed) to disclose bank-specific information about its emergency lending during the financial crisis. The disclosures revealed the extent to which the Fed had served as a global lender of last resort, providing dollar liquidity to foreign banks and foreign central banks. I exploit these unanticipated disclosures on two levels. First, I use the disclosed information to evaluate the motivations behind the Fed's global lending during the crisis. My findings indicate that the Fed supported foreign banks in countries in which U.S. money center banks had high loan exposures, which suggests that the Fed served the interests of major U.S. banks. Second, I explore the congressional response to the revelation of the Fed's massive global lending. I analyze an "Audit the Fed" vote in the House of Representatives that would end the Fed's confidentiality about the banks and countries it supports and reduce its monetary policy independence. I find the influence of U.S. money center banks also extends to Congress by way of campaign contributions: contributions from these banks significantly reduce the likelihood that a representative will vote in favor of the bill. In addition, I find that right-wing representatives were substantially more likely than their left-wing peers to support the bill, which suggests that new congressional coalitions are forming on the role of the Fed in the (global) economy.

International audience; It is widely acknowledged that the ratios of public debt over GDP reached historically high levels in the Euro area during the recent sovereign debt crisis. More unnoticed however is the simultaneous increase in the share of government debt held by residents that has started in late 2008 in most fragile economies of the area. This paper develops a simple theoretical framework, in which multiple equilibria arise, to explain why exogenous increases in the debt level may cause this share to increase, due to distinct expected returns on domestic sovereign debt for domestic and foreign creditors in times of turmoil.

We present a simple model of sovereign debt crises in which a country chooses its optimal mix of short and long-term bonds subject to standard contracting frictions: the country cannot commit to repay its debts nor to a specific path of future debt issues, and contracts cannot be made state contingent nor renegotiated. We show that, in order to reduce incentives to engage in debt dilution, the country must issue short-term debt. This exposes it to roll-over crises and inefficient repayments. We examine the effects of alternative restructuring regimes, which either write-down debt or extend its maturity in the event of crises, and show that both necessarily improve ex ante welfare if they they do not decrease expected payments to creditors during crises. In particular, we show that the way in which these regimes redistribute payments between short- and long-term creditors, which has been a central point in recent policy debates, is inconsequential.

This paper provides a new framework to study the term structure of interest rate spreads and the maturity composition of sovereign bonds. As observed in the literature, sovereign interest rate spreads increase during crises, with short term interest rate spreads rising more than long term spreads. The inversion of the yield curve is accompanied by lower debt issuance and a shortening of the maturity structure. In addition, sovereign debt restructurings may lead to a non-monotonic term structure of interest rate spreads, as evidenced during the recent sovereign debt crisis in Greece, when the yield curve developed a humped shape. To properly capture the observed variation of expected sovereign debt collection at different horizons and thus account for the dynamics in the maturity of debt issuances and its co-movement with the level of spreads across maturities found in the data, this paper introduces a new quantitative dynamic model of the term structure of interest rate spreads of government defaultable debt under incomplete markets.

Sovereign default is often associated with the downfall of incumbent governments in democratic polities. Existing scholarship directs attention to the relationship between default and domestic politics and institutions rather than the broader international environment wherein repayment and default take place. We explore the possibility that the impact of a country’s decision to default on partisan survival will also be shaped by the prevalence of default amongst its peers in its local network. Illustrating this line of reasoning with international trade, our results support the argument that given networked default, voters see national default as a lost strategic opportunity to elevate a country’s reputation and are more inclined to punish incumbent regimes who fail to repay. These results are inconsistent with an alternative possibility — that networked default might contribute to the decay of a repayment norm and thus provide a justifiable “excuse” for default at home. Furthermore, our results are robust to alternative measures of regime governance and entropy balancing in light of systematic differences between defaulting and non-defaulting regimes. Overall, our findings point to the political interdependence of default and repayment and the need for political scientists to take greater account of network effects in analyzing the consequences of economic misbehavior.

This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises—currency crises, sudden stops, debt crises, and banking crises—and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions.

The global financial crisis of 2007-09 has led to an intensive research program analyzing a wide range of issues related to financial crises. This paper presents a summary of a forthcoming book, Financial Crises: Causes, Consequences, and Policy Responses, that includes 19 contributions examining these issues and distilling policy lessons. The book covers a wide range of crises, including banking, balance-of-payments, and sovereign debt crises. It reviews the typical patterns prior to crises, considers lessons on their antecedents, and analyzes their evolution and aftermath. It also provides valuable policy lessons on how to prevent, contain and manage financial crises.

The paper compiles a new data base, based on the earlier work by Kray and Nehu, to assess the determinants of sovereign debt crises over the last forty years. A simple statistical analysis of the cause of the crises is performed. It shows that neither the serial defaulter nor the "global crisis" theories of sovereign crises explain much. Sovereign debt crises owe mostly to the level of indebtedness of the countries. About half the risk factor such as we shall compute it originates from this term. The remainder owes for another 25% to the quality of governance of the country, such as captured by the CPIA index which measures indirectly the ability of countries to wither external bad shock. On these fronts, we show that the bulk of countries which were at the center of previous crises are now below the danger zone, which explains why, for them, this crisis was different.

The aim of this paper is to assess the short- and medium-term impact of debt crises on GDP. Using an unbalanced panel of 154 countries from 1970 to 2008, the paper shows that debt crises produce significant and long-lasting output losses, reducing output by about 10 percent after eight years. The results also suggest that debt crises tend to be more detrimental than banking and currency crises. The significance of the results is robust to different specifications, identification and endogeneity checks, and datasets.

The Indonesian economic quarterly reports on and synthesizes the past three months' key developments in Indonesia's economy. Its coverage ranges from the macro economy to financial markets to indicators of human welfare and development. It is intended for a wide audience, including policy makers, business leaders, and financial market participants, and the community of analysts and professionals engaged in Indonesia's evolving economy. The challenge for Indonesia is to maximize the opportunities that this brings, in terms of enhancing future growth and making investments that can improve the welfare of the entire population, while managing the associated risks. Strong capital inflows, particularly portfolio, have been seen across emerging markets, including Indonesia. These inflows are driven by yield differentials and the stronger growth prospects, and improved creditworthiness, of emerging economies relative to heavily indebted, higher-income economies. Further quantitative easing in the US has provided an additional, cyclical boost to this trend. Global commodity prices also picked up in recent months. In November, the US dollar price of non-energy commodities rose by 3.4 percent over the month with food and raw material prices up by 4.9 percent and 7.6 percent, respectively. The underlying drivers were strong growth in demand from emerging economies, particularly China, and also supply disruptions in the agriculture sector.

This paper offers a theory of conditionality lending in 19th-century international capital markets. We argue that ownership of reputation signals by prestigious banks rendered them able and willing to monitor government borrowing. Monitoring was a source of rent, and it led bankers to support countries facing liquidity crises in a manner similar to modern descriptions of “relationship” lending to corporate clients by “parent” banks. Prestigious bankers’ ability to implement conditionality loans and monitor countries’ financial policies also enabled them to deal with solvency. We find that, compared with prestigious bankers, bondholders’ committees had neither the tools nor the prestige required for effectively dealing with defaulters. Hence such committees were far less important than previous research has claimed.

India's economic performance in FY2009/10 shows that the recovery from the slowdown during the global financial crisis is well underway. India's Gross domestic Product (GDP) growth in FY2009/10 has beaten expectations by reaching 7.4 percent compared with 6.7 percent in the previous year. In particular, agricultural sector growth was better than feared with a slightly positive growth rate despite the worst monsoon shortfall in three decades. Strong growth in the fourth quarter pushed annual GDP growth to 7.4 percent in 2009-10. Fourth quarter growth reached 8.6 percent (y-o-y), the highest quarterly growth rate since the end of FY2007/08. The industrial sector's robust recovery beat expectations. Growth in the last quarter of fiscal year FY2009/10 was an unexpectedly high 13.3 percent resulting in over 12 percent growth in the second half of year, nearly double the 6 percent growth witnessed in the first half. Higher inflation mars the bright picture, but there are clear indications of moderation. Inflation as measured by the wholesale price index (WPI) averaged 10 percent during February-May 2010. India's recovery after the slowdown seems well underway. Growth is projected to climb to 8-9 percent in the next two years. These growth rates are achievable without a renewed build-up of inflationary pressure as long as agricultural growth returns to trend, infrastructure constraints are alleviated, and international prices remain stable. Over the next year, sources of growth will shift from fiscal stimulus to manufacturing and, possibly a recovering agriculture.

This paper builds a new dataset with detailed information on the universe of foreign government bonds issued in New York in the 1920s and uses these data to describe the behavior of the financial intermediaries which operated in the New York market during the period leading to the interwar debt crisis. The paper starts by showing that concerns over reputation played an important role in intermediaries‘ underwriting choices. Next, the paper checks whether banks managed to charge abnormal underwriting fees on bonds that would eventually default and finds no evidence of such practice (?banksterism?). The paper concludes by discussing some parallels between the experience of the 1920s and the current debate on the "originate and distribute" model.

The global crisis is now in the rear view mirror and world growth is being restored. In sharp contrast with past episodes of global turmoil, this time the recovery is led by the periphery, specifically by the larger and more dynamic emerging markets (Brazil, China, India, South Korea, Malaysia, Philippines, and Thailand). For this group of emerging markets (EMs), the contraction in economic activity was much smaller than that of rich countries, the recovery started earlier, and the rebound has been much steeper. Latin America and the Caribbean (LAC) are second among emerging regions, after Asia, in the strength of the recovery. The first part of the report focuses on macroeconomic and financial aspects, emphasizing the outlook going forward. Finally, the second part examines some aspects of the adjustment in labor markets during this crisis in comparison to previous ones.

Using survey data on debt management strategies, this paper studies whether the probability that a country has a debt management strategy, publishes its debt strategy, and uses a benchmark-based strategy is affected by democratic accountability, institutional quality, past debt crises/defaults, IFIs development assistance, and participation in debt management programs. We find that countries located in Latin America and Caribbean are less likely to have developed a debt management strategy and, if they have, they are less likely to publish it. In contrast, countries located in Middle East and North Africa are less likely to use quantitative benchmarks in formulation of their debt management strategy. A country is more likely to have developed a debt management strategy if it has an experience of a past debt crisis, but not of repeated debt crises. Institutional quality and democratic accountability could significantly contribute to emergence of more transparent and accountable debt management strategies in developing countries. IFIs' technical assistance on public debt management could be enhanced by IFIs conducting their own, prior diagnostic reviews.

Latin America faces the twin challenges of achieving economic growth and reducing extreme inequality. Notwithstanding the heterogeneity among Latin American countries (LACs), most of them exhibit both: (i) low average Gross Domestic Product (GDP) growth; and (ii) increased inequality during the 1980s. This long period includes the 'lost decade,' when outcomes in both variables were evidently negative. These negative trends have persisted since the early 1990s, in the period of intense reforms under the Washington consensus. The development gap (difference in GDP per capita or per worker between rich countries and LACs) and the equity gap have broadened in this period. The report evaluate: (a) the macroeconomic environment in which agents make their decisions (usually in LACs, under an economic activity operating significantly below potential GDP, with outlier macro-prices, and fluctuating aggregate demand); (b) features of financial reforms (usually intensive in short-term segments and weak financing of risk and long-term financing), and their implications for capital formation and the distribution of opportunities in the domestic economy; (c) features of trade reforms (intensive in resource-based exports but low total output of tradable); and (d) the distribution of productivities, which is closely linked to the narrow space granted for the development of small and medium enterprises (SMEs).