Before the onset of the financial crisis, European households and non-financial firms were borrowing heavily in lower-yielding foreign currencies to finance their home mortgages or business investments, even though they did not necessarily have a steady income in the currency concerned. Five years after the financial crisis, banks still hold a substantial amount of foreign currency loans to unhedged borrowers on their balance sheets. This column quantifies the systemic risk that these foreign currency loans pose to the European banking sector.
Pınar Yeşin, 26 November 2013
Tatiana Didier, Roberto Rigobon, Sergio Schmukler, 12 November 2012
Investment through global funds increases year on year. But how and where are global funds’ portfolios allocated? How and which recipient countries, underlying investors, and policymakers benefit? This column argues that global funds in fact represent restrictive investment practises. If we want as many countries, investors and companies to benefit as possible, we must aim to change global funds’ organisational structures and thereby managers’ behaviour.
Nicolas Véron, 15 February 2012
Market conditions in Europe have improved of late – but this column reminds us that improvement on the turmoil of 2011 is hardly difficult. It argues that Europe’s fundamental design problems still remain unresolved and that leaders should use the market lull to prepare the next steps.
Michael Bordo, Peter L Rousseau, 26 May 2011
How interconnected are finance, trade, and economic growth? This column looks to the past in search of an answer. Examining economies that traded across the Atlantic, it finds that finance and trade reinforced one another between 1880 and 1914 but these links were absent in the post-war period. Financial development has been strongly related to growth throughout the last 130 years, whereas trade had a direct effect on growth only after 1945.
Eduardo Levy Yeyati, 03 April 2011
Conventional wisdom states that financial globalisation has been advancing since the mid-1980s, particularly in developing countries. It also states that this should have fostered international portfolio diversification and consumption smoothing. But this column takes a closer look at the data and argues that neither financial globalisation nor portfolio diversification has grown significantly in emerging markets over that period.
William Jack, Tavneet Suri, 16 March 2011
The success of the mobile money programme in Kenya – where money is exchanged via mobile phone – has been phenomenal. In four years, a country with only 850 bank branches has seen the number of outlets providing the service grow from 4,000 to 25,000. People have access to formal finance as never before. This column studies 3,000 households between 2008 and 2010, tracking this social and economic transformation.
Jean Imbs, 10 November 2010
What makes the global crisis global? This column argues that the interdependence of the global economy, brought about by financial linkages between developed countries as well as goods trade ties with developing countries, has made the global crisis the first global recession in decades.
Kati Suominen, 03 November 2010
Will financial regionalism damagingly fragment the global financial architecture precisely at the time when sturdy system-wide management is needed? This column points to the world trading system’s engagement with regional trade agreements as a source of lessons for how to harmonise regional and global approaches to international finance.
Martin Brown, Karolin Kirschenmann, Steven Ongena, 13 September 2010
Foreign-currency loans in Eastern Europe are seen as a major threat to financial stability. Why then are they so widespread? This column presents evidence from over 100,000 loans made by a Bulgarian bank between 2003 and 2007. It finds that one-third of foreign-currency loans were actually requested in local currency by the firm, suggesting that banks are pushing them.
Gianluca Benigno, Huigang Chen, Christopher Otrok , Alessandro Rebucci, Eric Young, 16 August 2010
The fallout from global crisis has left many calling for economy-wide, macro-prudential policies, such as taxes on capital flows and capital controls. This column argues that the case for such measures is ambiguous at best – the excessive borrowing on which they are predicated is not a general and robust feature of financially developed and integrated economies.
In the fall of 2008, the world financial system seems on the verge of collapse. A decade earlier, the crisis in East Asia affected the lives of millions overnight. Dramatic changes in China and India have a severe impact on the world economy. While living standards in some developing countries have improved, poverty remains rampant in many. These are some of the serious economic challenges facing the world. Everywhere, development organizations, NGOs, government agencies, central banks, and investment banks are looking for experts who can apply cutting-edge analysis to solve such problems. The program combines rigorous analytical training with a strong focus on policy. For more information, visit www.barcelonagse.eu/ITFD.html