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Policy Area Papers on Financial regulation



The Universal Credit Rating Group:  Measuring Debt Ethically The Universal Credit Rating Group: Measuring Debt Ethically
Daniel Cash, World Economics, December 2016
The Universal Credit Rating Group (UCRG) is a collection of rating agencies that are aiming to redress what they see as an imbalance in the provision of credit ratings across the global economy. This article describes the UCRG and discuss as its chances of succeeding in ... More


Data on Indicators of Governance: Handle with Care Data on Indicators of Governance: Handle with Care
M.G.Quibria, World Economics, June 2016
This article provides a select review of data used as indicators of governance. Despite the popularity and considerable success of the existing body of governance indicators in putting the spotlight on governance inadequacies in developing countries, they are fraught ... More


What Have We Learned From the Global Financial Crisis of 2008-09 and its Aftermath? What Have We Learned From the Global Financial Crisis of 2008-09 and its Aftermath?
Anthony Elson, World Economics, June 2015
This article summarizes a number of key lessons from the effects of the global financial crisis that, with the passage of time, are having an important impact on views about global financial stability, macroeconomic theory and policy, income inequality and the role of t ... More


Quicksilver Markets Quicksilver Markets
Theodore Berg, World Economics, June 2015
One of the missions of the Office of Financial Research is to analyse asset market valuations and if there are excesses, explore the potential financial stability ramifications of a sharp correction. The author argues that U.S. stock prices today appear high by historic ... More


Taking Stock of Microfinance Taking Stock of Microfinance
Antara Haldar & Joseph Stiglitz, World Economics, June 2015
This paper explores the current global turmoil in microfinance in the context of the problems that have arisen at SKS Microfinance in India. The authors argue that the roots of the current crisis lay in the attempt to scale-up the original “Grameen” model of microfinanc ... More


African Diaspora Remittances are Better than Foreign Aid Funds African Diaspora Remittances are Better than Foreign Aid Funds: Diaspora-driven development in the 21st century
Adams Bodomo, World Economics, December 2013
In this article, two sources of socio-economic development finance for Africa, African Diaspora remittance funds and Overseas Development Assistance (ODA) funds, are compared. It is argued that Diaspora remittance funds constitute a better alternative to ODA funds for t ... More


Remittances and their Macroeconomic Impact Remittances and their Macroeconomic Impact: Evidence from Africa
Mthuli Ncube & Zuzana Brixiova, World Economics, December 2013
This paper examines the macroeconomic trends, drivers and the impact of remittances in Africa. First, it documents the increasing share of remittances relative to other foreign capital flows to Africa, the distribution of remittance inflows across countries, and some ke ... More


Strengthening the Early Warning Exercise Strengthening the Early Warning Exercise: Enhancing IMF and FSB coordination
Bessma Momani, Skylar Brooks, Michael Cockburn, Warren Clarke & Dustyn Lanz, World Economics, September 2013
Following the 2007–2008 global financial crisis, the G20 leaders tasked the International Monetary Fund (IMF) and the newly created Financial Stability Board (FSB) to jointly undertake Early Warning Exercises (EWEs) in order to identify vulnerabilities within the global ... More


Cross-Border Financial Integration in Asia and the Macro-Financial Policy Framework Cross-Border Financial Integration in Asia and the Macro-Financial Policy Framework
Philip R. Lane, World Economics, June 2013
In relative terms, Asia came through the global financial crisis relatively well. In part, this can be attributed to its conservative approach to international financial integration. At the same time, financial globalisation means that Asia cannot be fully insulated fro ... More


The International Liquidity Crisis of 2008–2009 The International Liquidity Crisis of 2008–2009
William A. Allen & Dr Richhild Moessner, World Economics, June 2011
The ‘credit crunch’ that began in August 2007 turned into a crisis when Lehman Brothers failed in September 2008. That event caused large international capital flows, including heavy repatriation of dollars to the United States. Central banks, led by the Federal Reserve ... More


José De Gregorio on Howard Davies and David Green: Banking on the Future. The Fall and Rise of Central Banking José De Gregorio on Howard Davies and David Green: Banking on the Future. The Fall and Rise of Central Banking

World Economics, December 2010
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Global Financial Crisis Global Financial Crisis: A mid-year review of progress to date
Priya Nandita Pooran, World Economics, September 2010
This article reviews the degree of progress in financial regulatory reform and proposes new areas for inclusion in the reform agenda. It assesses the changes and responses to the proposed structure in the European Union and further discusses current responses to the fin ... More


Paying the High Price of Active Management Paying the High Price of Active Management: A new look at mutual fund fees
Ross M. Miller, World Economics, September 2010
Financial economists have long known that actively managed mutual funds underperform comparable index funds and that investment management fees are a major contributor to this underperformance. This article shows that the impact of mutual fund fees is even greater when ... More


George Soros’ Reflexivity and the Global Financial Crisis George Soros’ Reflexivity and the Global Financial Crisis
Thomas D. Willett
World Economics, June 2010
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The International Financial Architecture The International Financial Architecture: Yesterday, today and tomorrow
Onno de Beaufort Wijnholds, World Economics, June 2010
The global financial crisis requires a global solution. A deep-seated overhaul of the international financial system is needed, but could be frustrated by political wrangling, particularly in the United States, but also in the European Union. Moreover, international coo ... More


Finance, Technology and Multinationals from the Periphery Finance, Technology and Multinationals from the Periphery: An analysis of the Latin American experience
Edmund Amann & Werner Baer, World Economics, March 2010
This article analyses the emergence of Latin American multinational corporations (MNCs), with a particular emphasis on the roles of finance and technology. It is established that the need to acquire foreign technology and finance has played a key role in the emergence o ... More


Global Imbalances, the Financial Crisis and the International Monetary System Global Imbalances, the Financial Crisis and the International Monetary System
Ignazio Visco, World Economics, March 2010
Even though the proximate causes of the crisis lie in previous financial excesses, the extent to which these have developed owes much to fundamental sources of vulnerability present in the global macroeconomic environment. However, imbalances and asset price misalignmen ... More


Narrow Banking Narrow Banking
John Kay, World Economics, March 2010
The credit crunch of 2007–8 was the direct and indirect result of losses incurred by major financial services companies in speculative trading in wholesale financial markets. The largest source of systemic risk was within individual financial institutions themselves. Th ... More


The Systemic Regulation of Credit Rating Agencies and Rated Markets The Systemic Regulation of Credit Rating Agencies and Rated Markets
Amadou N.R. Sy, World Economics, December 2009
Credit ratings have contributed to the current financial crisis. Proposals to regulate credit rating agencies focus on micro-prudential issues and aim at reducing conflicts of interest and increasing transparency and competition. In contrast, this paper argues that macr ... More


The IMF, the Credit Crunch and Iceland The IMF, the Credit Crunch and Iceland: A new fiscal saga?
Sheetal K. Chand, World Economics, September 2009
Iceland was badly hit by a fundamental mismatch between the assets and international liabilities of her banking system, with severe consequences for the welfare of the population. The country now has an International Monetary Fund programme. The paper asks three questio ... More


The Secret of Canadian Banking: Common Sense? The Secret of Canadian Banking: Common Sense?
Laurence Booth, World Economics, September 2009
This article looks at the basic reasons why the Canadian banking system was recently judged by the World Economic Forum to be the soundest in the world. It does so by first examining the basic functions of a financial system and what Canadian banks are allowed to do as ... More


Alistair Milne on Robert J. Shiller,The Subprime Solution: How Today’s Global Financial Crisis Happened and What to Do About It Alistair Milne on Robert J. Shiller,The Subprime Solution: How Today’s Global Financial Crisis Happened and What to Do About It

World Economics, June 2009
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Understanding Crime, Political Uncertainty and Stock Market Returns Understanding Crime, Political Uncertainty and Stock Market Returns: A case study of the Colombian stock market
Juan Carlos Franco Laverde, Maria Estela Varua & Arlene Garces-Ozanne, World Economics, June 2009
Colombia’s economy has experienced positive growth over the past few years despite the incidence of serious armed conflict in the region. However, the Colombia of today still faces a significant degree of sociopolitical instability as a result of organised crime associa ... More


Charles Goodhart on Jean-Charles Rochet, Why Are There So Many Banking Crises? Charles Goodhart on Jean-Charles Rochet, Why Are There So Many Banking Crises?: The Politics and Policy of Bank Regulation

World Economics, March 2009
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The Great Moderation and the New Business Cycle The Great Moderation and the New Business Cycle
Ann Spehar, World Economics, March 2009
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The World Financial Crisis The World Financial Crisis: New economy, globalisation and old-fashioned philosophy
F. Gerard Adams, World Economics, March 2009
The world financial crisis of 2008 is a consequence of new financial technologies, new accounting methods and new international linkages. These developments have come at a time when governments have returned to an old-fashioned free market philosophy. This paper links t ... More


Sweden’s Bank Nationalisations Sweden’s Bank Nationalisations: Are there lessons for today?
Fredrik Erixon, World Economics, March 2009
Many banks are on the verge of bankruptcy and have received support from the government to stay afloat. Measures taken have not sufficed, and an increasing number of economists and commentators are calling for the nationalisation of banks in the United Kingdom and Unite ... More


Global Imbalances and the Lessons of Bretton Woods Global Imbalances and the Lessons of Bretton Woods
Graham Bird & Thomas D. Willett, World Economics, September 2008
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Unwinding Global Economic Imbalances Unwinding Global Economic Imbalances: What’s growth got to do with it?
Graham Bird, World Economics, September 2008
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Singapore’s Sovereign Wealth Funds Singapore’s Sovereign Wealth Funds: The political risk of overseas investments
Friedrich Wu, World Economics, September 2008
This paper examines Singapore’s two sovereign wealth funds (SWFs)-the Government Investment Corporation of Singapore (GIC) and Temasek Holdings (Temasek)—and the political risks which they are exposed to in their overseas investments. Wu argues that Temasek has hitherto ... More


The Sovereign Wealth Funds of Singapore The Sovereign Wealth Funds of Singapore
Anthony Elson, World Economics, September 2008
This paper examines the origin, evolution and recent operations of Singapore’s two sovereign wealth funds, Temasek Holdings (TSK) and the Government Investment Corporation (GIC). Singapore is a unique case in that it has two of the oldest and largest sovereign wealth fu ... More


Risk-Pricing and the Sub-Prime Crisis Risk-Pricing and the Sub-Prime Crisis
Andrew G. Haldane, World Economics, September 2008
As the sub-prime crisis celebrates its first birthday, what lessons have been learnt? The crisis was rooted in a misperception problem among end-investors, facilitated by financial engineers selling “tail risk” products. Contrary to the precrisis rhetoric, this tail ris ... More


Trends and Challenges in Islamic Finance Trends and Challenges in Islamic Finance
Heiko Hesse, Andreas (Andy) Jobst & Juan Solé, World Economics, June 2008
The paper first discusses the current trends in Islamic finance, which has become mainstream with currently more than US$800 billion of assets worldwide and a buoyant market for sukuk bonds. However, this exorbitant growth raises many challenges, particularly in the are ... More


Islamic Economics and Finance Islamic Economics and Finance
Rodney Wilson, World Economics, March 2008
This article provides an introduction to key concepts and methods involved in an Islamic approach to business, investment, risk taking and insurance. The prohibition of riba (interest or usury) profoundly influences the way business transactions and investments a ... More


The Future of Financial Regulation The Future of Financial Regulation
Howard Davies, World Economics, March 2008
In light of the recent turmoil in global financial markets and criticisms of the performance of the regulatory system, Sir Howard Davies-who prior to his current appointment as Director of the London School of Economics was Chairman of the Financial Services Authority, ... More


Sovereign Wealth Funds Sovereign Wealth Funds: What they are and what’s happening
Stephen Jen, World Economics, December 2007
Sovereign Wealth Funds (SWFs), much in the news of late, are a new and growing class of funds that are already large in size, and will likely grow very rapidly in the coming years. How they will operate, both in terms of their portfolio allocation and the way in which t ... More


European Financial Market Integration European Financial Market Integration: Distant dream or nascent reality?
Patrice Muller, World Economics, September 2004
European Monetary Union and a vigorous legislative agenda have profoundly changed the environment in which the European financial services industry operates. These developments should have contributed to a deepening of financial market integration in the European Uni ... More


Blueprint for Public Company Reform Blueprint for Public Company Reform
Edward Gottesman, World Economics, December 2003
The crisis of confidence in corporate governance and the opacity of public company reporting are growing concerns. These flaws in the market system have been highlighted by the stock market bubble and pose a threat to orderly capital flows. Reform is needed, but legi ... More


China’s Capital Market China’s Capital Market: Better than a casino
Stephen Green, World Economics, December 2003
Throughout the 1990s, China’s stock market was developed as a tool of industrial policy. It was used to supply capital to state-owned enterprises (SOEs) that remained controlled by the state and whose performance usually declined after listing. Secondary market tradi ... More


James Tobin, 1918–2002 James Tobin, 1918–2002
An interview with introduction by Brian Snowdon & Howard Vane
World Economics, September 2002
Professor James Tobin, who died on 11 March 2002, was possibly the most eminent of the world’s ‘Keynesian’ economists. Described by Nobel Laureate Paul Samuelson as “the archetype of a late-twentieth century American scholar”, Tobin was without doubt one of the most ... More


The Puzzle of the Harmonious Stock Prices The Puzzle of the Harmonious Stock Prices
Randall Morck & Bernard Yeung, World Economics, September 2002
A peculiar pattern is evident across the stock markets of different countries. In emerging markets, such as Peru and China, all the stocks in the country tend to rise and fall together in the course of ordinary trading. But in developed countries, such as Denmark and C ... More


Some Facts about Hedge Funds Some Facts about Hedge Funds
Harry M. Kat , World Economics, June 2002
Hedge funds promise investors the best of both worlds: superior performance and high diversification potential combined into one. This article discusses a number of recent findings that show that the case for hedge funds is less straightforward than often portrayed. A ... More


Letter from Buenos Aires Letter from Buenos Aires
Pierre Wassenaar, World Economics, March 2002
“IMF criminals!” cry the antiglobalists in the wake of Argentina’s descent into chaos. But the real crime of Argentina’s last ten years was its own supineness in tying its fortunes for so long to the economy of an indifferent superpower, and allowing itself to become t ... More


Capital Controls Capital Controls: The experience of Malaysia
Jomo K.S., World Economics, March 2002
Malaysia’s decision to adopt capital controls in September 1998 reminded the world that there are alternatives to capital account liberalisation. Unfortunately, there has been a tendency for both sides in the debate over the capital control measures to exaggerate the ... More


Stock Markets and Central Bankers Stock Markets and Central Bankers: The economic consequences of Alan Greenspan
Stephen Wright, World Economics, March 2002
There is a near-consensus that central bankers should focus their attention on the control of inflation, and should accordingly not pay attention to movements in stock markets. This view is reinforced by the continuing influence of the Efficient Markets Hypothesis (EMH) ... More


Cohabiting with Goliath Cohabiting with Goliath: How small equity exchanges will survive in the future
Avinash Persaud, World Economics, December 2001
The surviving legacy of the Long Term Capital debacle of October 1998 is an increased preference for liquidity among international investors. This process has a self-fulfilling element with liquidity following investors out of the less liquid markets and into the mor ... More


What Happened to the Washington Consensus? What Happened to the Washington Consensus?
Graham Bird, World Economics, December 2001
At the beginning of the 1990s it appeared that there was considerable agreement about the kind of economic policies that countries turning to the IMF and the World Bank should pursue. These included macroeconomic stabilisation, microeconomic liberalisation and openne ... More


Bad Market Days Bad Market Days: Lessons from the stock market crashes of 1929 & 1987
Harold Bierman, World Economics, September 2001
There are a large number of misconceptions regarding the great stock market crash of 1929 and the crash of 1987. Both crashes occurred when the general level of business was good and getting better. In 1929 there were very few hints that the great depression was two ye ... More


Redefining the Role of the State Redefining the Role of the State: Joseph Stiglitz on building a ‘post-Washington consensus’
An interview with introduction by Brian Snowdon
World Economics, September 2001
An interview with introduction by Brian Snowdon
Professor Joseph Stiglitz is without question one of the world’s leading economists. In his extensive research he has made seminal contributions to the analysis of the economic consequences of incomplete informa ... More


Economic Globalisation Economic Globalisation: How far and how much further?
Ramkishen Rajan & Graham Bird, World Economics, September 2001
The concept of globalisation has received a great deal of popular attention in recent years. However, the term is often used quite loosely. When defined to mean closer international economic integration, the evidence shows that the extent of globalisation may easily ... More


The Rebirth of the Corporate Bond Market The Rebirth of the Corporate Bond Market
Bill Robinson, John Raven & Christopher Chua , World Economics, June 2001
There has been a major switch from equity to debt finance in recent years, associated with a fall in the long-term rate of interest. The paper explores the macro-economic causes of the sea change in interest rates (lower budget deficits, independent central banks, lo ... More


IMF Programmes: Is there a conditionality Laffer Curve? IMF Programmes: Is there a conditionality Laffer Curve?
Graham Bird, World Economics, June 2001
The long-standing debate over IMF conditionality has received a new lease of life in the context of the debate over a new international financial architecture. Conditionality has increased in recent years and some proposals for reform envisage a continuation of this t ... More


Sending the Herd off the Cliff Edge Sending the Herd off the Cliff Edge: The disturbing interaction between herding and market-sensitive risk management practices
Avinash Persaud, World Economics, December 2000
In the international financial arena, policy makers chant three things: market-sensitive risk-management, transparency and prudential standards. The message is we do not need a new world order, just to improve the workings of the existing one. While many believe this is ... More


The International Economic System in the Twentieth Century The International Economic System in the Twentieth Century: An interview with Barry Eichengreen
Brian Snowdon, World Economics, September 2000
This wide-ranging discussion takes in globalisation, the causes of the Great Depression (and the likelihood of future recurrences), the Marshall Plan and post-war European recovery, growth in the 1950s and 60s followed by the problems of the 70s, and the strengths and w ... More


Response to Professor Bird Response to Professor Bird
Allan Meltzer, World Economics, September 2000
Allan Meltzer responds to Graham Bird’s article "Sins Of The Commission: The Meltzer Report On International Financial Institutions" [World Economics, Vol.1, No.3, July-September 2000]. In that article, Bird argued that the International Financial Institutions Ad ... More


Sins of the Commission Sins of the Commission: The Meltzer Report on international financial institutions
Graham Bird, World Economics, September 2000
In the aftermath of the East Asian financial crisis there has been much discussion of a new international financial architecture. A significant contribution to this debate is the Report of the International Financial Institution Advisory Commission, sponsored by the US ... More


Is there a Case for an Asian Monetary Fund? Is there a Case for an Asian Monetary Fund?
Graham Bird & Ramkishen Rajan, World Economics, June 2000
The East Asian financial crisis has spawned a number of proposals for institutional reform. Some envisage reforming existing institutions, particularly the International Monetary Fund (IMF), while others suggest that new institutions are needed. Amongst them is the idea ... More


Proposals for a better International Financial System Proposals for a better International Financial System
Stephany Griffith-Jones, World Economics, June 2000
This paper analyses three essential functions of global financial market management that currently are not properly met, and could best be met by new institutional developments: 1. prudential regulation; 2. provision of official liquidity to countries or markets in cris ... More