Search results

This chapter examines the effect of changes in the public debt–gross domestic product (GDP) ratio on long, 10 year, interest rates in a panel of 17 countries over the period 1870–2016 controlling for other variables, in particular the world interest rate. Over this long period, one can argue that most of the big changes in public debt were the product of factors largely exogenous to national interest rate determination, such as war, depression or financial crisis. The issue is of current relevance since the Covid-19 pandemic has caused large increases in the ratio of public debt to GDP in many countries. The estimates suggest that it is the change in debt, rather than the level of debt or the deficit that matters for long interest rates. World interest rates have long- and short-run effects on interest rates which are very well determined and close to one. Current inflation has a small but significant effect.

In the domestic credit market creditor and debtor rights are clearly defined. In contrast, sovereign debt repayment is largely contingent on the debtor government’s willingness to repay as enforcement of contracts at the international level is limited. In this chapter we explore different sources of sovereign debt crises as opportunistic and myopic behavior by debtor nations, over-consumption of imported goods, credit temptation by lenders eager to allocate savings surpluses, and unexpected consequences of initially seen appropriate policies. We explore how these factors have played out in the Euro-debt crisis and outline a framework for creditor responsibility to complement debtor self-restraint.

This chapter is devoted to the issue of ensuring financial stability in the state. The main goal of the research is to determine the role and policy of the National (Central) Bank, which was called up, together with the Government, to ensure financial stability in the Republic of Belarus. The actions of the National Bank for the implementation of monetary policy, macroprudential regulation, and supervision are reviewed. It is noted that the regulation and supervision of banks, nonbank credit and financial organizations, the payment system, the sector of other financial intermediaries (leasing activities, microfinance activities, activities of forex companies) is carried out by the National Bank of the Republic of Belarus. The main practical actions of the Government and the National Bank aimed at maintaining and ensuring financial stability is highlighted: monitoring of financial stability (goals, tasks, objects, monitoring directions are defined); creation of the Financial Stability Board (goals, objectives, representation, personal responsibility); disclosure of information on financial stability is carried out on an ongoing basis – the publication of the analytical review “Financial Stability in the Republic of Belarus.” The research provided a summary of the state of the country's financial sector and presented the achievements of the National Bank and state institutions for ensuring financial stability. The main problems affecting financial stability are highlighted: insufficient efficiency of the activities of large enterprises of the real sector of the economy; high levels of credit risk in banks; high dollarization of bank balance sheets. The directions of development of the financial market of the Republic of Belarus, contributing to ensuring financial stability are presented.

By the beginning of the nineteenth century, British public debt, accumulated over the eighteenth century and during the Revolutionary and Napoleonic Wars (1793–1815), had attained extremely high levels, at times even reaching 200% of the gross national product (GNP). This increase in debt paradoxically coexisted with the early progression of the industrial revolution.

In this chapter, we explain this concomitance by the effective policies of sovereign debt management put in place by the State and the Bank of England (BoE). First, the State put in place measures to lower its risk of default by funding its debt with tax revenue that would allow it to honour due payments. Second, following the suspension in 1797 of cash payments for pounds sterling, the BoE, in addition to its role in financing the State, followed an active policy of sovereign debt management, promoting both bank liquidity and market liquidity.

Following a successful debt-renegotiation process in the mid-2000s, Argentina consolidated a path of growth and debt relief. The outbreak of the global financial crisis in 2007–2009 and other domestic imbalances altered the economic scenario. In this context, the authorities tried to return to global financial markets, but legal conflict with vulture funds made that option unpalatable. In 2015, the triumph of a right-wing political coalition restored the dominance of neoliberal economic policies, including the return to debt and equity markets. The subsequent cycle of indebtedness and capital flight faced by Argentina not only unleashed a major crisis but also caused the return of the International Monetary Fund, which granted the largest lending arrangement to a single country in its history. The aims of this chapter are to analyze the winding cycle of debt reduction and overindebtedness experienced by Argentina between 2001 and 2022; to examine the set of structural factors as well as the role of certain domestic and foreign actors; and to consider the long-term effects of external indebtedness and some lessons that can be drawn for other countries in the Global South.

This chapter analyzes the rules and institutions that have characterized the European Monetary Union (EMU) during its prolonged crisis, stressing the limits of the strategy pursued by the European authorities. It also examines the issues of current account imbalances, economic growth and the problem of debt, and their interconnections. The main purpose of this chapter is to indicate feasible economic solutions and political arrangements in order to complete the institutional system of the EMU. This requires appropriate reforms of its institutional architecture. But such reforms demand changes in the treaties in order to make the Eurosystem more consistent and endowed of democratic legitimacy, so to have appropriate tools, resources and policies that can contribute to the stability, cohesion and development of the Eurozone.

After the end of the Napoleonic War, few issues of public policy dominated discussions in England as fervently as the issue of currency and the national debt. A time of civil unrest and social radicalisation, the circulation of ideas and pamphlets was prolific. The difficulties of post-war reconstruction sparked a long debate on issues of monetary reform and repayment of the national debt. The growth of national debt increased the size of the financial market and had important consequences for a changing class dynamic in domestic political affairs. The distributional aspects of the conflict were present, as was the satirical mockery of mishandling of public affairs. In much of the subsequent scholarship the organisation of taxation and expenditure, and the financial system and the issue of currency have been analysed as separate. This chapter brings them together. In particular, it focuses on Ricardo’s monetary thought and his views on public finance and contextualises them in light of his contemporaries.

Purpose: With this study, the authors aim to analyze and highlight the financial performance of pension funds (public and private) and their impact on the economic growth of The Organisation for Economic Co-­operation and Development (OECD) countries, while taking into account the effect of market capitalization, inflation, and public debt.

Methodology: To carry out this analysis, the authors subjected our secondary data (derived from published in the annual reports of the OECD, the World Bank and the IMF) to econometric tests, specifically linear regression, random effect, fixed effect, the Hausman–Taylor Regression, the Generalized Estimating Equations (GEE), the Generalized Method of Moments – Arellano – Bond Estimation (GMM) and carried out an analysis of linear trends through the historical method and comparative method.

Findings: Based on the empirical results of this study, the authors conclude that the assets of public and private pension funds have positively affected the economic growth of OECD countries (2002–2018).

Practical Implications: This study provides an overview of the functioning of pension systems in OECD countries as well as the effects of these pension funds on their economic growth. Moreover, it provides additional new knowledge for governments and policymakers in these countries and a good source of information for all employees (whether public or private), on the quality and standards of living after retirement.

Significance: The importance of this study rests on the fact that OECD countries have a highly developed economy and have high-performance financial markets. Therefore, this highlights the importance of investments by pension funds in their financial markets for economic growth and for the indirect effects caused on their economies.

Since the early modern age, the debt of the State was a constant source for concern to the Spanish governments. Episodes of defaults caused by enormous expenditure to keep the Empire slowly faded out until a certain reorganization of public finance was attained in the central decades of the nineteenth century. The core idea that finance ministers and economists, in general, had at that time was to balance the public budget controlling expenses, in order to handle the problem of public debt. However, alternative views on government finance existed. Focusing on a crucial period for the consolidation of Spanish liberal regime and its public finance, this chapter shows that, among a predominant concern for reducing public expenditure as the best way to stabilize the economy and promote economic growth, the character of Luis María Pastor emerges to support government expansionary policies financed with credit. Far from fearing deficit, Pastor, one of the leaders of the Spanish liberal school of economic thought, believed that investment in infrastructures financed through debt was the key to economic growth. Through a multiplicative effect, a program of public investment would enhance economic growth, eventually solving the long-term insufficiency of Spanish finance. This gives evidence that ideas on public finance of classical liberal economists were far from uniform, contributing to a more precise view on the body of doctrines of this school.

The last financial crisis opens the question of the level of debt sustainability in the developed countries. The majority of the EU member states faced the growing trend of public debt (while some countries are unable to service it on time, i.e. Greece) and some of the new members face the problem of external debt. Regarding there is no standard tool for measurement of public debt sustainability this analysis provides the statistical and econometric approach to find out bi-directional impact of public debt on GDP growth rate, unemployment, current account and interest rate spread. The research is performed on the five different groups of EU member states: EU28, Eurozone, new member states, GIIPS and EU-10-core countries. Results indicate the necessity to keep the public debt stable regarding the very slow post crisis recovery and low growth rates to avoid unintended consequences of debt burden on the EU economies.