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Estimating Loss-in-Output as a Cost of a Financial Crisis
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Vighneswara Swamy, World Economics, June 2019
The global financial crisis caused a huge loss of economic output, depletion of financial wealth, extended unemployment, psychological consequences and other significant costs. A quantitative exploration of modelling loss-in-output as a cost of financial crisis using macroeconomic indicators is useful in understanding the impact of a crisis. The conservative estimates for India suggest that, over a period of ten years, a financial crisis can cause a cumulative loss-in-output ranging from 48% of GDP to 59% of GDP after discounting at 0.025 and 0.07 respectively. Intermediate values are also explored. Estimating loss-in-output in terms of GDP simplifies estimation of the impact of financial crises. Policymakers and regulators must be more prudent and alert in sensing the early indicators of a financial crisis and act swiftly in containing its perils.
The Financial Crisis and Gender: Assessing Changes in Workforce Participation for Rural India
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Siddhartha K. Rastogi & Pradyun Rame Mehrotra, World Economics, March 2018
Labour market data in India shows female participation declining as GDP has increased, a phenomenon found in other East Asian economies over past two decades. This contradicts empirical observations, which argue over the feminization of the work force due to participation in global export markets, primarily driven by wage efficiency of female labour. The impact of the global financial crisis on female participation rates in rural India in 2009-10 is studied with a cross-state analysis to test theories about female unemployment in a downturn. One of the major findings is that as the formal wage difference between men and women decreases, the female participation gap increases, but more data is needed to identify critical causal factors.
The Universal Credit Rating Group: Measuring Debt Ethically
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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 its goal of offering a viable opposition to the Big Three rating agencies. What is proposed by this article, is that although the Group provide a welcome narrative, the foundation to their endeavour is potentially lethal to their chances of success.
Are Estimates of the Economic Contribution of Financial Services Reliable
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Brian Sturgess, World Economics, March 2017
The methods used to estimate the contribution of financial services to national income are seriously flawed. Banking sector output in the UK was estimated to have increased in 2008 while the financial services sector was collapsing. The relative contribution of service activities in GDP is not easy to measure, but there are many problems in measuring financial services in general and the output of banks in particular. National income accounting standards, used to estimate the output of financial intermediation companies such as banks, rely on flawed indirect measurements based on interest rate spreads. Furthermore, many services are provided at no charge so price indexes cannot be meaningfully created. The main method used, Financial Intermediation Services Indirectly Measured (FISIM), is arbitrary and fails to measure the quality of banking assets and risk. Over the period 2003–7, one study found that aggregate risk-adjusted output would have been only 60% of officially estimated output across the Euro area.
Data on Indicators of Governance: Handle with Care
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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 with a whole host of statistical and measurement issues. It argues that these indicators should be applied with caution, keeping their shortcomings in mind.
Measuring Financial Inclusion using Multidimensional Data
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Mandira Sarma, World Economics, March 2016
The author notes that the lack of a financially inclusive system is a major concern not only for developing and low-income economies, but for many developed and high-income countries. At the global level, a network of financial regulators from developing and emerging economies, called the Alliance for Financial Inclusion (AFI), was formed in 2008 to provide a platform for peer-to-peer learning from the experiences of country specific policies of financial inclusion. The paper notes that there has been an intensive debate about how financial inclusion should be measured. In consequence, it recommends using the Index of Financial Inclusion (IFI), developed by the author. The IFI is multidimensional, it satisfies many important mathematical properties and can be used to compare levels of financial inclusion across economies and over time. IFI values computed for 110 countries for 2014 show various levels of financial inclusion: Chad ranked lowest with an IFI value of 0.021 while Switzerland had a value of 0.939. Measuring the IFI over 2004 – 2014 indicates a general improvement in the level of financial inclusion across countries, but the availability of data is the biggest constraint on its usefulness.
Data on Singapore’s Sovereign Wealth Fund is Flawed
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Christopher Balding, World Economics, September 2015
This paper undertakes a critique of the quality of Singapore’s public economic data in the context of the claim that one of the island’s sovereign wealth funds, Temasek Holdings, reports that it has earned since inception in 1974 an average annualized rate of return of 16%. Over a similar time period the Singapore stock market earned 4.99% implying that Temasek on average outperformed the local stock market in which it was heavily invested, by a factor of more than three times every year. The paper replicates Temasek’s portfolio and analyses Singapore’s public finances and finds that irregularities may exist within Temasek financials. It concludes that if there are as of yet unknown financial weaknesses within Singaporean public finances that have yet to be realized then given the importance of the island in Asia’s financial markets, this should raise concerns over the quality of financial statements produced by government linked corporations and the public sector.
GDP figures: How the Financial Times gets it wrong
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David Henderson, World Economics,
Dollar market exchange rates are erroneously used by many publications to make cross-country comparisons of GDP. Exchange rates underestimate the relative size of developing economies and provide misleading estimates of important economic ratios such as energy intensity figures. The United Nations System of National Accounts recommend the use of Purchasing Power Parity converters which account for cross-country differences in price levels.
New Data on Global Differences in Family Offices
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Robert Eigenheer, World Economics, March 2014
A family office is not a specifically-defined institution per se. Rather, the family office is a broad concept to cover all financial needs of one or more wealthy families. While in the United States the first family offices were established in the nineteenth century, interest in the family office concept has recently been growing in emerging markets around the globe due to the increasing number of ultra-wealthy individuals and families in those regions. Nowadays, family offices are set up all over the world. This fact inevitably leads to the question: Are there regional differences among the structures of family offices, their services, their investment strategies, and their operational costs?
The Argentine Productivity Slowdown
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Ariel Coremberg, World Economics, September 2011
The purpose of this working paper is to analyse the main causes of economic growth in Argentina during the 1990–2006 period. This research proposes a methodology in order to identify Total Factor Productivity (TFP) gains in the strict sense of positive shifts in the production function, independent of short-run cyclical fluctuations in the utilization of productive factors and relative prices effects; distinguishing it from residual or apparent TFP which expresses a phenomenon of real cost changes but not necessarily changes in long-run economic growth. The main results of this research are that strict TFP has a lower trend than apparent TFP. Similar conclusions are obtained in the case of labour productivity adjusted for labour intensity. Argentina sustained a prolonged period of economic growth over 1990–2004, biased to capital accumulation and utilization during the 1990s, and biased to labour input demand after the devaluation year of 2002. In the light of these findings and the data problems after 2007 there are doubts about the ability of the Argentine economy to generate the necessary productivity gains to support sustainable long-term economic growth.

Displaying: 1-10 of 10