Global economy

Dirk Schoenmaker, 30 August 2014

In the aftermath of the financial crisis, governments have been reducing their potential exposures to the banking system. This column argues that a fiscal backstop remains necessary for a banking system, contrary to what many policymakers claim. The main reason is that private arrangements may not be sufficient in a severe crisis. Without a credible backstop, depositors will run on a troubled banking system.

Margaret McMillan, 30 August 2014

Some argue that growth across Africa is fundamentally a result of rising commodity prices and that if these prices were to collapse, so too would Africa’s growth rates. This column documents substantial shifts in the occupational structure of most African economies between 2000 and 2010 and thus provides a good reason for cautious optimism about the continent’s economic progress.

Christopher Findlay, Silvia Sorescu, Camilo Umana Dajud, 29 August 2014

Countries facing rising risk premiums on their debt have recognised the need for structural reform, but some politicians have argued that austerity is necessary in the short run because structural reform takes too long. This column argues that financial markets can bring forward the benefits of structural reform, and therefore that such reforms should be given greater weight in the package of crisis responses.

Aasim M. Husain, Anna Ilyina, Li Zeng, 29 August 2014

The conflict in Ukraine and the sanctions against Russia have already affected the Russian financial markets. This column discusses the repercussions for the rest of Europe of possible disruptions in the trade and financial flows with Russia. Eastern European countries could be seriously affected by a slowdown in the Russian economy due to their close links with Russia. Western countries – despite having looser links with it – could also experience significant effects. 

Esteban R Vesperoni, Emil Stavrev, Sebastian Weber, 28 August 2014

As prospects in key advanced economies improve, financial conditions will tighten. The effect of outward spillovers from source countries to emerging markets will depend on whether financial conditions are driven by stronger growth (real shocks) or unexpected tightening in financial conditions (money shocks) –  including those due to financial stability concerns or market uncertainty about the exit path. From a recipient’s perspective, spillovers will also differ across countries – reflecting interactions between domestic fundamentals and policies with the external shock.

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