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Article
Publication date: 13 February 2009

Susan Schroeder

The purpose of this study is to investigate why “financial fragility” carries different definitions in the economic literature. This is a useful task as the detection of…

Abstract

Purpose

The purpose of this study is to investigate why “financial fragility” carries different definitions in the economic literature. This is a useful task as the detection of “financial fragility” depends, in part, upon how one defines it. According to Post Keynesian economists, financial fragility is a process that can culminate in financial instability (an event). For mainstream or New Keynesian economists, financial fragility has been traditionally defined as a state in which a shock can trigger instability. More recently, however, mainstream economists have recast their definition as a particular form of financial instability – an event. Each definition of financial fragility is intimately linked to the theoretical foundation upon which it rests. This carries important implications for the ability of policymakers to assess and manage the health of an economy.

Design/methodology/approach

The different approaches to the definition and detection of financial fragility are compared using corresponding sets of indicators. Indicators for the Post Keynesian approach are derived from a simple cash‐flow accounting framework, in the spirit of Hyman Minsky. The economy selected for study is New Zealand.

Findings

According to the Post Keynesian approach, New Zealand has been in a financially fragile state for over three years, a period during which policymakers could have been creating ways to make New Zealand more resilient to the onset of instability. According to the New Keynesian approach, New Zealand may just now be experiencing fragility, giving policymakers much less time to react.

Originality/value

This study traces the definitions of financial fragility to their underlying theoretical frameworks and draws the implications for the methods of detecting financial fragility.

Details

International Journal of Social Economics, vol. 36 no. 3
Type: Research Article
ISSN: 0306-8293

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Article
Publication date: 26 February 2020

Surya Nepal, Sae Woon Park and Sunhae Lee

The purpose of this paper is to empirically assess the impact of remittances on the economic performance of the 16 Asian developing countries, taking account of their…

Abstract

Purpose

The purpose of this paper is to empirically assess the impact of remittances on the economic performance of the 16 Asian developing countries, taking account of their institutional qualities.

Design/methodology/approach

A panel of 16 Asian developing countries (Central Asia, South Asia, and ASEAN) over the period of 2002–2016 is employed in the analysis. To assess the impact of remittances on economic performance in consideration of institutional quality, OLS estimates as well as GMM are used.

Findings

The effect of remittances on economic growth is statistically significant. In addition, they also impact economic growth when they interact with institutional or financial development variables. For the long-run growth process of Central Asian, South Asian, and ASEAN countries, a sound and smooth institutional framework appears to be indispensable. Also, it was found that more fragile economies tend to achieve bigger growth than less fragile economies, as this kind of growth is triggered by more remittances flowing into fragile economies. However, the impact of remittances on growth does not depend on the level of ICT. FDI and financial development have positive impact on growth.

Research limitations/implications

There are limitations to this research as well. Due to the unavailability of data, several countries had to be removed from this study. The cost of sending money might be an important variable for this study. However, the data on this variable from reliable sources are almost impossible to gather. Therefore, this variable is also not included in this research. The savings from remittances when intermediated through formal financial channels will, in fact, produce a positive allocation and distribution of resources that may eventually become an important source of growth. However, one precondition for larger and greater growth is that remittances need to be well and properly utilized by the financial sector. Therefore, quality institutions should be formed first, which can facilitate investment activities and make the flow of remittances more convenient.

Originality/value

This paper exclusively considers the case of Asian developing countries (Central Asia, South Asia, and ASEAN) to assess the impact of remittances on the economic performance of these countries, with special consideration of the interaction effects of remittances and institutional quality in these emerging Asian economies. The previous studies on the effect of remittances on growth do not conform to one concrete conclusion. This study is undertaken in a bid to get the best possible result on the impact of remittances on the growth of the selected countries, majority of which attract substantial chunk of remittances into their economies.

Details

Journal of Economic Studies, vol. 47 no. 3
Type: Research Article
ISSN: 0144-3585

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Book part
Publication date: 2 March 2011

Willi Semmler and Aleksandr V. Gevorkyan

Emerging markets are said to have sustained relatively well in the recent global crisis. There are several factors that help explain this popular view, such as, for…

Abstract

Emerging markets are said to have sustained relatively well in the recent global crisis. There are several factors that help explain this popular view, such as, for example, perceived separation from key international financial centres. Still a lot is to be digested in the crisis aftermath with immediate implications for financial markets and real economy. This chapter offers a unique insight into dynamics within transition economies via an extended blended fiscal–monetary policy rules model with possibility of foreign reserves targeting and foreign currency-denominated debt dynamics. Calibration is based on actual data and is done under various targets and financial risk conditions. Prudent monetary policy and fiscal policy initiatives within current context drive the choice of targets. That may help dampen negative impacts of the crisis and thwart potential currency run. This chapter advances three possible post-crisis scenarios, each with unique solution for reserves, exchange rate, sustainable debt and output levels. Categorizing between net exporters and net importers based on countries' external positions, group-specific results are derived. While both groups are susceptible to exchange-rate risk affected by a multitude of shocks due to their fragile financial system, net importers risk high inflation, but net exporters over-borrowing. This chapter contributes to the literature on global financial crisis, macroeconomic policy, and role of nominal targets and foreign reserves in emerging markets.

Details

The Impact of the Global Financial Crisis on Emerging Financial Markets
Type: Book
ISBN: 978-0-85724-754-4

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Book part
Publication date: 8 July 2010

Andrew Ladley and Jessie Williams

Purpose – This chapter uses the work of Oxford economist Paul Collier to explore the conditions under which financing systems can be created to support the governance and…

Abstract

Purpose – This chapter uses the work of Oxford economist Paul Collier to explore the conditions under which financing systems can be created to support the governance and economies of fragile states. This support is especially needed in the immediacy of a crisis or as a practical strategy to potentially change the dynamics of a particularly vulnerable state. The focus is on his 2008 proposal for Haiti, for a partnership of domestic and international financial institutions. Central to the proposal is the establishment of an Independent Service Authority (ISA) to fund and implement government policy, especially in delivery of basic services. Representatives from aid donors, Haitian expatriates or diaspora and members of the government would sit on the ISA board, sharing responsibility for effectively administering public funds. This model was proposed to the United Nations in late 2008 to stabilise and transform the government and economy of Haiti (Collier, 2008, 2009b).

Methodology – The chapter explores the issues raised in the model using a case study of the Regional Assistance Mission in the Solomon Islands (RAMSI).

Findings – “The work concludes that the RAMSI process worked well to stabilise financial systems and survived significant political challenge due to a framework of local agreements, regional or international resolutions, treaties, statutes and contracts. This suggests that such a framework will help to ‘buttress’ any mixed local–international financial institutions in the event of domestic political or legal contest in Haiti (or wherever else this model is considered).

Limitations – The chapter does not compare Haiti and the Solomon Islands as societies or economies, or go into the details of how the proposed financial institutions would operate and transition to other arrangements. Space also prevents consideration of the other international partnership models applied in Haiti from 2006–08 (e.g. the Haiti Economic Governance Reform Operation or EGRO; see the case study on Haiti by Bradford and Scott (forthcoming), 76–84). After the earthquake in January 2010, Collier re-visited Haiti and stressed the importance of longer-term economic transformation (a Haiti Marshall plan) as well as emergency relief.**Collier, P., & Warnholz, J.-L. (2010a). Haiti earthquake: Social and economic fabric must be rebuilt too. The Guardian, Sunday, 17 January. Available at http://www.guardian.co.uk/world/2010/jan/17/haitiearthquake-social-fabric-rebuilt; Collier, P., & Warnholz, J.-L. (2010b). We need a Marshall plan for Haiti. Globe and Mail, 13 January. Available at http://www.theglobeandmail.com/news/opinions/we-need-amarshall-plan-for-haiti/article1430309/ A key element of the international community's assistance will be finding mechanisms to handle finances. However the details of the new proposals are yet to be made public, hence this chapter focuses solely on Collier's 2008 proposals.

Details

Economics of War and Peace: Economic, Legal, and Political Perspectives
Type: Book
ISBN: 978-0-85724-004-0

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Article
Publication date: 5 September 2016

Nabamita Dutta and Sanjukta Roy

The purpose of this paper is to test the relationship between state fragility and transparency. A state is deemed fragile when it falters in its ability to manage conflict…

Abstract

Purpose

The purpose of this paper is to test the relationship between state fragility and transparency. A state is deemed fragile when it falters in its ability to manage conflict and in its capacity to deliver basic functions and implement public policy. Although minimizing fragility of the state is undoubtedly an integral component of economic development, there is a huge variation across countries in terms of where they stand with regard to fragility. Further, it also explores how educational attainment affects the relationship between state fragility and transparency.

Design/methodology/approach

Using several robust estimation methodologies and a relatively new database on transparency, the authors find that higher levels of transparency lower state fragility. They reply on fixed effect estimators, lagged one period and five periods and system GMM estimators as part of our identification strategy.

Findings

Using several robust estimation methodologies and a relatively new database on transparency, the authors find that a higher level of transparency lowers state fragility. Greater and free flow of information empowers the populace, restores trust in government, increases participation in the political arena and, thus, reduces state fragility. This paper additionally shows that higher educational attainment helps reap the benefits of transparency even more and, thus, catalyzes transparency to lower-state fragility more effectively.

Research limitations/implications

Our research shows that greater transparency leads to lower state fragility. Additionally, if the populace of the country has higher educational attainment, the benefits of transparency in reducing state fragility is enhanced. Although enhancing transparency amid high state fragility may be a challenging task, it can be achieved by providing the populace with better media access via internet and cell phones.

Originality/value

The authors use a relatively new database of transparency to show that transparency acts as an important determinant of state fragility. A state is deemed fragile when it falters in its ability to manage conflict and in its capacity to deliver basic functions and implement public policy. Given this definition, it is needless to say that what can affect state fragility and how can such fragility be lowered is an important research agenda. This paper aims to fill this gap. Additionally, it shows the importance of education while exploring such a relationship.

Details

International Journal of Development Issues, vol. 15 no. 3
Type: Research Article
ISSN: 1446-8956

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Expert briefing
Publication date: 13 March 2015

Prospects for Russia/CIS in the second quarter.

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Article
Publication date: 3 October 2016

Norman Mugarura

The purpose of this paper is to articulate the mandate of the International Monetary Fund (IMF) not least in promoting a sound legal regulatory environment for markets to…

Abstract

Purpose

The purpose of this paper is to articulate the mandate of the International Monetary Fund (IMF) not least in promoting a sound legal regulatory environment for markets to operate globally and its inherent challenges. While acknowledging the plausible work done by the IMF in supporting countries to achieve their macro-economic stability, the paper articulates some of its shortcomings as a global institution. It is evident that the post-war climate in which the World Bank and IMF were created has drastically changed – which presupposes that these institutions now need to reposition themselves to reflect on contemporary global challenges accordingly. The author has argued in the past that a robust regulatory system should be devised taking into account the dynamic challenges in the market environment but also to prevent them from happening again.

Design/methodology/approach

The paper has utilized empirical evidence to evaluate the mandate of the IMF in addressing its dynamic challenges such as the global financial and debt crises in Europe and the USA and prevention of financial sector abuse globally. The IMF is one of the Bretton Woods Institutions charged with the oversight responsibility to enforce policies and enable countries to manage their macro-economic challenges efficiently.

Findings

The findings demonstrate that the IMF is as relevant and important as it was when it was created in 1945. However, there is a need for intrinsic and structural changes within this institution to continue discharging its mandate in a changed global regulatory landscape. The IMF is still crucial in fostering a fundamental stabilization function to fragile global economies in areas of financial and technical assistance, and developing requisite legal and supervisory infrastructure within fledging member countries.

Research limitations/implications

The paper was written by analysis of both theoretical and empirical data largely based on secondary data sources. It would have been better to first present the findings in an international conference to solicit wide views and internalize them accordingly.

Practical implications

While acknowledging the plausible work done by the IMF and its counterpart the World Bank in facilitating global financial markets regulation and prevention of financial sector abuse, as oversight institutions, they need to constantly review their mandate to respond robustly to their dynamic challenges such as the global and debt crises and financial sector abuse. Oversight institutions need to constantly review and adapt their mandate accordingly, if they are to discharge their varied responsibilities efficiently. They cannot stand still in the face of challenges because they will be superseded and kept at a back foot.

Social implications

Markets and states are embedded in each other, and the way they are regulated is of a significant importance to varied stakeholders and people.

Originality/value

This paper is one of its kind, is unique in its character and evaluates embedded issues using empirical evidence in a way not done in its context before. Secondary data sources have been evaluated to achieve a thoughtful analysis of the objectives of the paper.

Details

Journal of Financial Crime, vol. 23 no. 4
Type: Research Article
ISSN: 1359-0790

Keywords

Content available
Article
Publication date: 21 September 2017

Bayes Ahmed

“No climate change, no climate refugees”. On the basis of this theme, this paper aims to propose a method for undertaking the responsibility for climate refugees literally…

Abstract

Purpose

“No climate change, no climate refugees”. On the basis of this theme, this paper aims to propose a method for undertaking the responsibility for climate refugees literally uprooted by liable climate polluting countries. It also considers the historical past, culture, geopolitics, imposed wars, economic oppression and fragile governance to understand the holistic scenario of vulnerability to climate change.

Design/methodology/approach

This paper is organized around three distinct aspects of dealing with extreme climatic events – vulnerability as part of making the preparedness and response process fragile (past), climate change as a hazard driver (present) and rehabilitating the climate refugees (future). Bangladesh is used as an example that represents a top victim country to climatic extreme events from many countries with similar baseline characteristics. The top 20 countries accounting for approximately 82 per cent of the total global carbon dioxide (CO2) emissions are considered for model development by analysing the parameters – per capita CO2 emissions, ecological footprint, gross national income and human development index.

Findings

Results suggest that under present circumstances, Australia and the USA each should take responsibility of 10 per cent each of the overall global share of climate refugees, followed by Canada and Saudi Arabia (9 per cent each), South Korea (7 per cent) and Russia, Germany and Japan (6 per cent each). As there is no international convention for protecting climate refugees yet, the victims either end up in detention camps or are refused shelter in safer places or countries. There is a dire need to address the climate refugee crisis as these people face greater political risks.

Originality/value

This paper provides a critical overview of accommodating the climate refugees (those who have no means for bouncing back) by the liable countries. It proposes an innovative method by considering the status of climate pollution, resource consumption, economy and human development rankings to address the problem by bringing humanitarian justice to the ultimate climate refugees.

Details

International Journal of Climate Change Strategies and Management, vol. 10 no. 1
Type: Research Article
ISSN: 1756-8692

Keywords

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Expert briefing
Publication date: 30 July 2018

Greece will re-enter international capital markets solely on the strength of its economy, after a near-decade-long recession that wiped out one-quarter of its output and…

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Expert briefing
Publication date: 16 December 2019

The move, which has angered the farming sector, is one of several announcements aimed at boosting revenues in order to avoid austerity, and at generating enthusiasm among…

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