Liberalization and Rules on Regulation in the Field of Financial Services in Bilateral Trade and Regional Integration Agreements
Diemo Dietrich, J. Finke, C. Tietje
Beiträge zum Transnationalen Wirtschaftsrecht Nr. 97,
2010
Abstract
The recent international financial crisis has sparked a fierce debate about its causes and about how to prevent a recurrence. As liberalization and deregulation were widely considered being among the major culprits, de-liberalization and re-regulation seemed a natural response. However, an economic approach to this issue does not support such black-and-white solutions. Although liberalizing financial services sectors may threaten a developing country's financial stability in the short run, it also fosters long-run economic growth if sound legal and economic institutions are in place that can mitigate the adverse side-effects of liberalization. For achieving this objective, states need the policy space to implement such regulatory measures. Contrary to a wide-spread belief, states are not unduly hampered by bilateral or multilateral agreements. Instead, by providing a far-reaching exception concerning prudential regulation states can define their own regulatory approach. The challange for developing countries thus is to install regulatory capacities.
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Russia: Overcoming the Effects of Economic Crisis Takes Time
Martina Kämpfe
Wirtschaft im Wandel,
No. 6,
2010
Abstract
The last year's decline of Gross Domestic Product in Russia was harder than in most big economies of the world. The financial crisis has revealed specific circumstances of growth in Russia: The situation deteriorated not only by the downfall of crude oil prices, but especially by the Russian banking sector not being able to satisfy financing demand of the private sector enterprises. So foreign liabilities of enterprises had increased and the dependence of the enterprises on the international financial markets had strengthened. In that way impacts of the global financial crisis affected Russia harder. Although external conditions for the Russian economy improved in the last months due to the rise of world oil prices and global demand for commodities, domestic demand still suffers from small revenues and bad financing conditions for enterprises. Because of its structural weakness it will take Russia longer than other transformation countries to overcome the crisis. Economic growth in the near future will expand much smaller than on last years’ average.
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Reform of IMF Lending Facilities Increases Stability in Emerging Market Economies
J. John, Tobias Knedlik
Wirtschaft im Wandel,
No. 3,
2010
Abstract
Following the current international financial and economic crisis the IMF reformed its lending facilities. Two new instruments are of particular importance: the Flexible Credit Line (FCL) and the High Access Precautionary Arrangements (HAPA). The major innovation of the new facilities is that the traditional ex-post conditionality is replaced by an ex-ante qualification process. An ex-ante qualification process leads to a short-term availability of funds during the emergence of crises and avoids long negotiation processes during a crisis. Additionally, the FCL is high powered, amounting to 900 to 1000% of the quota. It can therefore be expected that the programs have preventive effects. In difference to previous attempts to implement precautionary credit lines, the FCL and HAPA successfully created demand. First empirical observations show, that a stigmatization, which could have been expected from experience, did not take place. Countries who qualified for the FCL did rather well during the current crisis and did not face shrinking confidence due to expected crises. To be more efficient, the new lending facilities should be complemented be an international regulatory framework, which limits moral-hazard-induced higher risk taking. Additionally more members should be encouraged to demand the new instruments to increase its systemic importance.
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Concerning the development of the debt level of the New Länder since the German unification
Sabine Freye
Wirtschaft im Wandel,
20 Jahre Deutsche Einheit - Teil 2 -
2010
Abstract
During the 1990s, public indebtedness rose remarkably in all German political subdivisions. This development was particularly strong in the New Länder. At the beginning of the 1990s, they had low indebtedness rates. Today, 20 years later, the debt level of some New Länder lies over the average value of all Federal states. The background of this development is complex and depends also on the individual situation of each state. Generally, the rise of the debt level of the New Länder can be attributed to the 1990s’ estimation of a fast adjustment of the New Länder’s economic and financial power to that of the old Federal states. From today's point of view, this estimation was too optimistic. Furthermore, the New Länder have been affected differently by the transformation-conditioned structural change and the therefore arising difficulties with the necessary adjustment to the market.
In Saxony-Anhalt, which is characterised by the highest debt level of the New Länder, the collapse of the basic industry has led to high regional unemployment and to a substantial migration of the population. Still Saxony-Anhalt has countrywide the largest negative migration balance.
Regardless of these state-specific characteristics of the transformation process, there is a gradual change in the attitude towards existing debts and their handling, starting around the year 2000. So, the interest in budget consolidation increases constantly. This development was supported by the economic boom of the years 2006 and 2007. At present, the economic crisis puts the consolidation efforts of the states to the test.
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Poland Weathers the Crisis
Martina Kämpfe
Wirtschaft im Wandel,
No. 12,
2009
Abstract
Expansion of economic activity in Poland in 2009 continued at a markedly lower level compared to previous years, but despite the falling external and domestic demand, economic recession did not happen until now. Early stabilisation measures, supported also by the European Community (EC) and the International Monetary Fund (IMF), helped to avoid substantial instabilities in the financial sector. It seems that Poland is not as hardly affected by the financial crisis as other countries. Unlike previous years, now net exports were the main driving force for growth – they more than compensated the decrease in domestic demand.
Unemployment had risen up from the lowest level in the last decade, but still moderately due to measures of job security. Given the further shrinking labour demand, unemployment will increase despite modest economic activity. Fiscal policy has to meet challenges under the current economic crises: Excess expenditure and deficiency in receipts will deteriorate general government deficit in 2009 and 2010. Without adopted consolidation strategy, Polish convergence to the Euro area will have to be postponed.
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The ADR Shadow Exchange Rate as an Early Warning Indicator for Currency Crises
Stefan Eichler, Alexander Karmann, Dominik Maltritz
Journal of Banking and Finance,
No. 11,
2009
Abstract
We develop an indicator for currency crisis risk using price spreads between American Depositary Receipts (ADRs) and their underlyings. This risk measure represents the mean exchange rate ADR investors expect after a potential currency crisis or realignment. It makes crisis prediction possible on a daily basis as depreciation expectations are reflected in ADR market prices. Using daily data, we analyze the impact of several risk drivers related to standard currency crisis theories and find that ADR investors perceive higher currency crisis risk when export commodity prices fall, trading partners’ currencies depreciate, sovereign yield spreads increase, or interest rate spreads widen.
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Finanzielle Instabilität und Krise in den Post-Transformations-Ländern
Hubert Gabrisch
Wirtschaftspolitische Blätter,
No. 3,
2009
Abstract
Contagion was only the trigger of the unexpectedly severe crisis in European post-transition countries. Rather, increasing financial fragility of the countries since 2001, after their banking and financial sector was overtaken by international financial institutions, was the origin. Euphoric expectations induced an asset price inflation followed by an increasing debt burden of the private sector, which was fueled by net capital inflows. This study argues that simple concepts of demand reduction do not offer any way out of the crisis. A second transition is necessary, which establishes a new growth model being robust against speculative capital flows and offering high growth rates.
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Russia: A Victim to Transition or to the Financial Crisis?
Marina Grusevaja
Wirtschaft im Wandel,
No. 8,
2009
Abstract
The global financial crisis has revealed deficiencies of the Russian economic system which are caused by the path of the transformation from central planning to the market economy, and not only attributable to the downfall of crude oil prices. While the worldwide liquidity crunch impaired the availability of loans to enterprises, the situation in Russia has deteriorated especially by the large exposure of the private sector to short-term foreign liabilities and by the one-sided orientation of the economy relying on the natural resources industry. Until the mid-2008, the foreign debt of the private banks and non-banks had increased strongly and had strengthened the dependence of the Russian economy on the developments on the international financial markets. The Ruble devaluation at the end of January 2009 aggravated the situation. The high short-term foreign debt of the private sector and the dependence on exports of natural resources are typical outcomes of the Russian transformation path. Therefore, on the one hand, the banking sector has not being able to satisfy financing demand of the private sector beyond the natural resources industries, enterprises became forced to borrow short-term money abroad. On the other hand, the economic strategy of the past seventeen years has strengthened the influence of the state on the natural resources sector – with the strong priority to develop it further. Hence, the one-sided economic development negatively affects the adaptability of the real-economic sector to change during the crisis period. In essence, the present political preferences of the government are aimed at providing direct financial assistance and at protectionist measures. In the long run, these actions could lead to stronger intervention of the state in the economy. Due to these recent developments, the crisis is likely to continue in Russia longer than in the other transformation countries.
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