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April 2015

The short-term objectives of long-term investors

Alvaro Enrique Pedraza Morales's picture

Effective management of retirement savings is fast becoming an important agenda in many countries due to a rapidly ageing population. In addition to fulfilling this critical function, pension funds, which are theoretically long-only investors, perform an important role by providing long-term financing and liquidity to the rest of the financial system.

These large institutional investors are often thought of as stabilizers for the financial system and are expected to behave in a patient, counter-cyclical manner, making the most of cyclically low valuations to seek attractive investment opportunities. Moreover, since pension funds are expected to invest with a long-term perspective, these institutions have generally not been thought of as adding to systemic risk.

Updated Global Findex: 62% of adults have an account; 2 billion still unbanked

Asli Demirgüç-Kunt's picture

Today we release our new research paper and the 2014 Global Findex dataset, an updated edition of the world’s most comprehensive gauge of global progress on financial inclusion. It’s based on interviews with almost 150,000 adults in more than 140 countries worldwide.

We have plenty to celebrate:

  • Account penetration is deepening in every region. Sixty-two percent of the world’s adult population has an account, up from 51 percent in 2011, when the Global Financial Inclusion database (as it’s known formally) was launched.
  • The ranks of the unbanked are shrinking Worldwide, the number of adults without an account tumbled by 20 percent, to 2 billion.
  • Mobile money accounts — accessed via mobile phone — is powering Sub-Saharan Africa’s march toward financial inclusion. While just 1 percent of adults globally use a mobile account and nothing else, 12 percent of adults in Sub-Saharan Africa have a mobile account — versus just 2 percent worldwide. Of those adults in Sub-Saharan Africa with a mobile account, 45 percent rely on that account exclusively.

Optimal tax policy in a high evasion context: evidence from Pakistan

Anne Brockmeyer's picture

Despite pressing needs for spending on social services and public investment, most developing countries struggle to raise sufficient tax revenues to meet their needs. Pakistan raises only 10% of GDP in tax revenue, whereas the United Kingdom raises more than twice as much, 25% (WDI 2012. In large part, this is due to the fact that tax evasion is widespread in developing countries. Estimates are scant, but we know that a significant share of firms are not even tax-registered (Bruhn et al 2013), and many firms that are tax-registered misreport their taxable income and transactions (Pomeranz 2013, Carillo et al 2014). What is less well known is that the tax instruments used in developing countries also differ significantly from those in developed countries (Gordon & Li 2009). For instance, many developing countries use production-inefficient taxes such as turnover taxes, which can distort firms’ input choices, and which standard prescriptions based on developed country contexts would discourage. What motivates these policies, and could they actually be an optimal response to the presence of evasion? In a paper forthcoming in the Journal of Political Economy, we shed light at this question, using theory and evidence from Pakistan.

The international bank lending channel of monetary policy rates and QE: credit supply, reach-for-yield, and real effects

Claudia Ruiz's picture

Various central bankers in emerging market economies have expressed concerns regarding the international spillovers of the U.S. and European quantitative easing, arguing for more coordinated global monetary policies. Despite the increasing interest in the topic, isolating the effect that the monetary policy of a country has on another country’s economy is not trivial, since many confounding factors (such as trade relations between countries or global macroeconomic shocks) take place simultaneously.