Global crisis

Joshua Aizenman, Yothin Jinjarak, Gemma Estrada, Shu Tian, 19 July 2017

The impact of the Global Crisis of 2008 played out differently in middle-income countries compared to developed countries. This column argues that the associations of growth level, growth volatility, shocks, institutions, and macroeconomic fundamentals have changed in important ways after the crisis. Educational attainment, share of manufacturing output in GDP, and exchange rate stability appear to increase the level of economic growth. Exchange rate flexibility, education attainment, and lack of political polarisation reduce the volatility of economic growth.

Maarten de Ridder, Coen Teulings, 13 July 2017

Around the world, growth has yet to recover to its pre-Global Crisis trend. This column uses the crisis as a quasi-natural experiment to test the endogenous growth hypothesis, which suggests that output has not recovered because the crisis affected the rate of technological progress. Firms that preferred a bank that was more severely affected by the crisis experienced a large fall in R&D investment and a persistent fall in output in subsequent years. This suggests a direct link between R&D and future productivity, as predicted by endogenous growth models.

Laura Alfaro, Gonzalo Asis, Anusha Chari, Ugo Panizza, 13 June 2017

Leverage levels in emerging market firms rose dramatically in the aftermath of Global Crisis. This column examines whether concerns of a repeat of the Asian financial crisis, which was largely attributed to corporate financial roots, are justified. While firm financial fragility is more widespread, it is less severe than in the period preceding the Asian Financial Crisis. However, certain large firms with high levels of foreign currency leverage are a potential key source of vulnerability in the transmission of adverse shocks such as exchange rate depreciations. 

Stephen Cecchetti, Kim Schoenholtz, 29 May 2017

In April 2017, the US House of Representatives passed a bipartisan revision of the bankruptcy code, which would expedite the resolution of adequately structured intermediaries. This column considers the new Financial Institutions Bankruptcy Act of 2017 and how it fits in with the existing Dodd-Frank mechanism. By raising the odds of an effective resolution, the Act (as a complement to Dodd-Frank) boosts the credibility of the US regime. However, in the absence of an Orderly Liquidation Fund-like provision for temporary government funding, investors and foreign regulators will expect a future US government to re-introduce an ad hoc bailout mechanism when it is inevitably needed.

Paul-Adrien Hyppolite, 28 May 2017

The Greek crisis is typically seen as a sovereign debt crisis. Using a new dataset, this column explores the dynamics of national wealth accumulation in Greece over the past two decades. It argues that, despite certain idiosyncrasies, the Greek crisis can be better characterised as a balance of payments crisis. This implies that Greece shouldn’t be seen as an outlier amongst the periphery Eurozone countries. 

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