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The Data Quality Index
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World Economics, June 2017
GDP data is important used to apportion funds from international organisations, to influence rating agency decisions and much more, but official data is totally inadequate for the demands made of it. The notion of GDP data is flawed conceptually, but there are also severe methodological issues that need to be addressed prior to making international comparisons and assessing data reliability. World Economics has created an interactive Data Quality Index for users of economic data which considers five readily measurable factors that influence data reliability across countries. The Data Quality Index ranks 154 countries based on an equal weighting of the five factors, but users can adjust the importance of each to their data needs.
De-Risking Impact Investing
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Neil Gregory, World Economics, June 2016
Despite great investor interest in impact investing, actual investment flows have remained modest. This is largely due to insufficient investment opportunities which offer a financially sustainable risk-return balance. A focus on de-risking impact investments can enable investors to find more assets which offer commercial returns on a risk-adjusted basis, without sacrificing impact. By cutting off the lower tail of the risk distribution, impact investments can offer comparable returns to other investments, as has been the International Finance Corporation’s (IFC’s) experience. Successful impact investing involves selecting assets and structuring investments differently to realize their potential to deliver both financial and social returns. We segment the supply and demand of impact investing funds, and identify the causes of elevated risks in prevalent approaches to impact investing. Drawing on IFC’s investment experience, we identify seven ways to reduce these risks. With these approaches, we provide evidence that investment opportunities can be generated that meet the requirements of investors seeking both commercial financial returns and social impact without trading one off for the other.
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.
Government Accounting
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Ian Ball & Gary Pflugrath, World Economics, March 2012
As the current sovereign debt crisis engulfing Europe broadens and threatens to bring down more governments and lead the world into another, potentially very serious, economic slowdown, minimal commentary and public debate has focused on a fundamental problem, and the need to address it. That problem is the deficient – and sometimes fraudulent – accounting practices employed by many governments around the world. A major shortcoming of many governments has been highlighted by the crisis – that is, the poor quality of public financial management and the lack of public accountability. And, while robust public-sector financial management would not alone solve the crisis, it is clear that the problems presented by the crisis will not be solved without it. Shareholders, debt providers and regulators of publicly listed companies would not tolerate for a minute the poor levels of reporting and disclosure evidenced by governments. Yet while governments recognise the need to impose stringent regulations on companies accessing funds from the public, many – indeed most – make little or no effort to meet such high standards in their own reporting. This is despite the fact that governments seek to raise hundreds of billions – indeed trillions – of dollars from the public. Improved financial reporting, disclosure and financial management of the public sector cannot be achieved until there is recognition that the incentives faced by politicians promote decision-making that works contrary to the public interest and appropriate institutional reforms are implemented.
The Black Economy - Benefit frauds or tax evaders?
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Jim Thomas, World Economics, March 2000
One answer to the question "How Rich are We?" is to compare levels of National Income either across countries or for a single country over time. However, the relevance of this approach depends on how accurately National Income measures the output of goods and services of a country. While it is difficult to measure, the Black Economy represents the output of goods and services that is not generally captured in the National Income Accounts. This article discusses the problems of measuring the size of the Black Economy and speculates on the questions of who is involved and how. The relative importance of Tax Evasion versus Benefit Fraud is discussed.



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