The establishment of Sovereign Wealth Funds (SWFs) has gained more global popularity in recent decades because many countries view the fund as a vehicle for macroeconomic stability. But after several years of operation, the relationship between SWFs and macroeconomic stability seems unclear. This chapter examines the nexus between SWFs and macroeconomic stability in countries that operate SWFs. It analyses the performances of gross domestic product (GDP) growth rates, inflation rates, exchange rates, interest rates and fiscal deficits relative to GDP and government debts relative to GDP before and after the establishment of SWFs. These variables are used to determine the macroeconomic stability of a country according to the Maastricht Criteria. It was found that the establishment and operation of SWFs concurred with the reduction in inflation and interest rates as well as deficits and debts to GDP ratios in most countries. One implication of this study is that SWFs that are integrated into a country’s fiscal policy can be utilized for macroeconomic stability. The chapter recommends the operation of SWFs with definitive objectives, effective management, accountability and transparency for macroeconomic stabilization.
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Kizito Uyi Ehigiamusoe and Hooi Hooi Lean
Viktoryia Tankoyeva, Flavio Bazzana and Roberto Gabriele
With the incidence of financial crises, the financial stability of banks has become a matter of great importance. In light of this fact, the accurate prediction of bank distress has been a central concern of bank supervisory authorities and regulators and, in addition, has received considerable attention in research. In this chapter, we identify the determinants of Russian bank failure by means of Cox proportional hazard models, with time-varying covariates and a sample of Russian banks for 2006–2013. We use an early warning system and a contemporaneous model based on the CAMELS approach to the independent variables. The overall results exhibit the expected signs, with interesting differences if we compare the results of the two models and if we compare smaller and larger banks. We also test the importance of sensitivity to market risk as a determinant of bank failure. We find, as expected, a negative sign and strong statistical significance for that variable in both models, albeit only for larger banks. Our findings suggest that the Central Bank of Russia should pay particular attention to the dynamics of CAMELS variables when assessing Russian bank solvency