Search results

Financial instability and economic crises are closely intertwined. There is no universally accepted definition. The term ‘stability’ or ‘instability’ refers to the behaviour of the system rather than to individual institutions. However, one cannot rule out that failure of a single financial institution can trigger significant financial turmoil as was happened in 2007–08 global financial crises. Like unstable equilibrium, instability implies inability to correct itself on its own. Instability, if it persists, turns into a crisis. In the above backdrop, the objective of this chapter is to investigate the financial crises and instability viewed both from economic and international political economy perspectives with a tale of four generation crisis models as it has been evolved over time to explain the phenomenon of different types of crises.

Reducing and eradicating global poverty features as a primary objective of the sustainable development goals (SDGs) for 2030. Since over half a century, the World Bank has disbursed loans amounting to billions of US dollars to assist countries to alleviate poverty. However, the path to zero poverty is often impaired with conflicts, social unrest and, most commonly, economic crisis. In this chapter, we examine the inter-linkage between various forms of economic crises, poverty and government expenditure for a set of 127 countries from 1985 to 2010. Using a simultaneous equation model, we test the direct effect of a financial crisis on the incidence of poverty and its indirect effect through the immediate decrease in government expenditure. Contrary to previous studies, our findings suggest that crises have no direct impact on poverty. We find a similar effect for currency, inflation and debt crisis. However, there is evidence that poverty increases indirectly due to a fall in government expenditure. Our results are robust for non-advanced and advanced economies and alternate estimation technique using factor analysis.

It has been already established that the countries that have opened their economies in advance have reaped more benefits compared to those who have done it late. For example, the countries of the West are far away from the countries of the East in terms of the per capita incomes as because, besides others, the magnitudes of trade openness of the former are higher compared to that of the latter. Besides countries, there are some economic groups such as European Union, Organization of Economic Cooperation and Development (OECD), etc. who have proved the similar growth impacts of trade. There is another group of highly developing economies, with the acronym of BRICS (Brazil, Russia, India, China and South Africa), which has proved as being highly beneficiaries of the trade liberalisation. But the magnitudes of trade openness and their impacts in these countries are subject to further explorations using modern data. The present chapter aims to compute trade openness using two different methods for the BRICS countries and make association of it with growth and foreign currency reserves (FCRs) for the period 1991–2019. In addition, the study examines whether the FCR is sustainable. It observes positive and negative correlations between economic openness and gross domestic product (GDP) growth and FCR in the member nations leading to mean that trade openness has definitely contributed to the growth as well as accumulation of FCRs. But, the trends in the FCRs are unsustainable in the BRICS nations.

This chapter examines the influence of external public borrowing resources on economic progress in Tunisia. The study focuses on two stages: First, the influence is studied in a direct sense and then in an indirect sense, i.e., through a transmission channel of this influence. By applying the autoregressive distributed technique with staggered lags (ARDL), over a period ranging from 1986 to 2019, the results showed that the influence of external borrowing resources on growth seems to be unfavorable in the short term but positive in the long term, hence the importance of the empirical technique chosen. Second, three interaction variables were tested, namely total government expenditure, government investment expenditure, and the real effective exchange rate. The results obtained call for better attention to the channels identified to maximize the positive influence of external public debt on the country's economic progress.