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Edited by Gerald A. Epstein
Soft Currencies, Hard Landings
Edited by Gerald A. Epstein
Gerald A. Epstein
Many observers thought that the financial crisis of 2007–08 would be a watershed moment in global finance. They believed the crisis would demonstrate, once and for all, the instability and inefficiency of this hyper-speculative global financial system, and finally bring an end to the destructive “neoliberal moment” and its “Washington Consensus” dictates in domestic and global economic policy (see, for example, Blanchard, Dell’Ariccia and Mauro, 2010). But, something surprising happened to “neoliberal financialization” on the way to the “dustbin of history”: it escaped. Financial deregulation and “neoliberal” populism in finance are in the ascendant in the United States and elsewhere, and the bankers are laughing, well. . .all the way to the bank.1 To be sure, there are important cracks in the old free market consensus on international financial issues. These cracks are leading to what Ilene Grabel (Chapter 5, in this volume) calls “productive incoherence” in theory and practice, which is leading to important opportunities for policy change in some areas. But, in many other areas, the old theories and practices are being resurrected after near-death experiences in the period following the crisis.
Lessons and Challenges for CESEE Countries and a Modern Europe
Edited by Ewald Nowotny, Doris Ritzberger-Grünwald and Helene Schuberth
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
Kizito Uyi Ehigiamusoe and Hooi Hooi Lean
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.
Julia M. Puaschunder
In the light of the current growth of Financial Social Responsibility, and to complement classic finance theories, this chapter explores the potential socio-psychological SRI motives of socially conscientious investors. As a first step towards a unified Financial Social Responsibility approach, a preliminary SRI framework will be presented to delineate the potential circumstances under which SRI is likely to occur and by which financial social conduct could be triggered. The theoretical framework will introduce social and psychological factors contributing to financial social conscientiousness. Being knowledgeable about SRI motives has manifold advantages. Overall, describing SRI helps in resolving societal losses imbued in the novelty, complexity and ambiguity of Financial Social Responsibility. Evaluating up-to-date research on financial social consideration will increase the effectiveness of Financial Social Responsibility and allow promoting SRI to the finance community.
Mohammed Amidu and Haruna Issahaku
Increased financial innovation is changing the role of financial markets in the global economy. This research provides a comprehensive literature review on the work done so far on the role financial markets play in building a safe and enduring world, and, on the basis of the review, builds a research framework for assessing the link between finance and sustainable development. The study provides an assemblage of empirical evidence and highlights the burning issues that require the attention of policy makers, researchers, practitioners, global development finance institutions and other stakeholders. The study concludes by elaborating critical research gaps. We find that the majority of the research is concentrated on Financing Sustainability & Responsible Investing and Sustainability & Performance while the sustainability implications of Islamic Finance and the Policy and Regulation dimensions of sustainability have received little attention.