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The world is poised on the threshold of economic changes that will
reduce the income gap between the rich and poor on a global scale
while reshaping patterns of consumption. Rapid economic growth in
emerging-market economies is projected to enable consumers
worldwide to spend proportionately less on food and more on
transportation, goods, and services, which will in turn strain the
global infrastructure and accelerate climate change. The largest
gains will be made in poorer parts of the world, chiefly
sub-Saharan Africa and India, followed by China and the advanced
economies. In this new study, Tomas Hellebrandt and Paolo Mauro
detail how this important moment in world history will unfold and
serve as a warning to policymakers to prepare for the profound
effects on the world economy and the planet.
What are the most damaging external shocks for countries at
different stages of development? What can countries do to protect
themselves against such disturbances? Real shocks (for example, to
the terms of trade) are the most important ones for developing
countries, but financial shocks (for instance, sudden stops) rank
highest for emerging market countries. "Country Insurance: The Role
of Domestic Policies" examines "self-insurance" policies whereby
countries can protect themselves - leaving to future work the role
of regional and multilateral arrangements. The main messages are
that countries need to adopt appropriate reserve buffers that take
into account their vulnerability to shocks - with the size of such
buffers quantified by region - and pursue policies, such as
longer-term domestic currency debt and foreign direct investment,
that secure less crisis-prone external liability structures.
The frequency and virulence of recent financial crises have led to
calls for reform of the current international financial
architecture. In an effort to learn more about today's
international financial environment, the authors turn to an earlier
era of financial globalization between 1870 and 1913. By examining
data on sovereign bonds issued by borrowing developing countries in
this earlier period and in the present day, the authors are able to
identify the characteristics of successful borrowers in the two
periods. They are then able to show that global crises or contagion
are a feature of the 1990s which was hardly known in the previous
era of globalization. Finally, the authors draw lessons for today
from archival data on mechanisms used by British investors in the
19th century to address sovereign defaults. Using new qualitative
and quantitative data, the authors skillfully apply a variety of
approaches in order to better understand how problems of volatility
and debt crises are dealt with in international financial markets.
This paper takes stock of the main fiscal risks facing the EAC
partner countries. These include macroeconomic shocks, and specific
risks, such as the financial performance of the public enterprises,
large infrastructure projects, PPPs, and pension funds. In
addition, weaknesses in the institutional framework are reviewed.
This analysis highlights some of the largest risks and begins to
give a sense of the potential magnitudes involved.
This paper analyzes the main sources of fiscal risks, including
from unexpected changes in macroeconomic variables and banking
crises, which can have major consequences for countries' fiscal and
public debt sustainability. It builds on an overview of existing
practices in a wide range of countries to provide practical
suggestions on how to promote disclosure of such risks and on risk
mitigation and management. The paper was written in response to
requests from IMF member countries for advice on this subject. The
paper also includes an example of a possible statement of fiscal
risks.
Financial globalization has increased dramatically over the past
three decades, particularly for advanced economies, while emerging
market and developing countries experienced more moderate
increases. Divergences across countries stem from different capital
control regimes, and factors such as institutional quality and
domestic financial development. Although, in principle, financial
globalization should enhance international risk sharing, reduce
macroeconomic volatility, and foster economic growth, in practice
its effects are less clear-cut. This paper envisages a gradual and
orderly sequencing of external financial liberalization and
complementary reforms in macroeconomic policy framework as
essential components of a successful liberalization strategy.
The frequency and virulence of recent financial crises have led to
calls for reform of the current international financial
architecture. In an effort to learn more about today's
international financial environment, the authors turn to an earlier
era of financial globalization between 1870 and 1913. By examining
data on sovereign bonds issued by borrowing developing countries in
this earlier period and in the present day, the authors are able to
identify the characteristics of successful borrowers in the two
periods. They are then able to show that global crises or contagion
are a feature of the 1990s which was hardly known in the previous
era of globalization. Finally, the authors draw lessons for today
from archival data on mechanisms used by British investors in the
19th century to address sovereign defaults. Using new qualitative
and quantitative data, the authors skilfully apply a variety of
approaches in order to better understand how problems of volatility
and debt crises are dealt with in international financial markets.
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