The pervasiveness and relevance of asset price booms and busts in modern economies has now been fully acknowledged. So has the case for combining prudential regulation and monetary policy in the complementary pursuit of financial and macroeconomic stability.
Despite tremendous progress in poverty reduction over the last two decades, poverty still persists. Along with South Asia, Africa is a region where large numbers of people continue to live in extreme poverty. It is also a region where there is clearly room for higher foreign trade levels (see Chart). Given that trade can generate growth – and thus poverty reduction – focus on trade-related reforms (e.g. lower tariffs, better logistics, and trade facilitation) deserves to be a high priority of the region.
If the global financial crisis -- and the events that led up to it -- have taught us anything, it is,“No complacency with asset price booms”. We know first hand the dire consequences of bubbles, so it is clear monetary policy makers can no longer passively observe the evolution of asset prices. If an economy is to pursue macroeconomic and financial stability, they should coordinate with financial supervisors – in an economic marriage of convenience – to ensure financial regulation and monetary policies are complementary, and implemented in an articulated way.
Bihar, a state in Eastern India has more than 100 million inhabitants and is India’s second poorest state. Ninety percent of the population lives in rural areas and the state has lagged behind in increasing access to finance in these areas. The credit-to deposit ratio of Bihar at 37% (an indicator of availability of credit in peri-urban and rural areas) is one of the lowest in India.
Jeevika, a program jointly supported by the World Bank and Government of Bihar, has demonstrated that investments in community institutions can deliver significant results. Investments in community institutions have helped them mature and become an institutional platform for the poor enabling them to demand better services from the public sector, improve access to finance from commercial banks and enhance their existing livelihoods.
It is increasingly recognized that well-defined property rights are crucial for realizing the benefits of market exchange and that such rights are not exogenously given but evolve over time in response to economic and political forces. The reduction of expropriation risk and the facilitation of market transactions are the two main categories through which property rights systems affect economic outcomes. However, the mechanisms by which these two categories affect outcomes differ in important ways.
The conventional wisdom is that the exchanging of information on an individual or firm will go a long way in determining credit worthiness, thereby improving credit availability. When a bank evaluates a request for credit, it can either collect information on the applicant first-hand, or it can source this information from other lenders that have already transacted with the applicant. Information exchange between lenders can occur voluntarily via “private credit bureaus” or it can be enforced by regulation via “public credit registries.”
There has been a noticeable lack of entries to the East Asia & Pacific finance blog recently, but unfortunately I've been otherwise occupied on a trip in Beijing. It has certainly been a busy time here in China's capital with the National People's Congress (NPC) going on. However, I haven't seen much of it other than the long traffic jams caused by the road closures. The NPC meetings covered some of the domestic economic stimulus plans, but it has not dealt directly with financial sector issues. Maybe it did not need to since the banks here have already responded to the stimulus.
A recent China Daily report had a great graphic that showed the recent boom in lending by the banking sector, which corresponds very nicely to the announcement of the original economic stimulus plan. As I highlighted in a prior blog post, the $586 billion economic stimulus plan announced in November was only 30 percent funded from the central government, and the expectation was that much of the rest was to come from state-owned banks. Well, it seems they have delivered with gusto!
"The East Asia and Pacific Region has not been spared the full fury of the economic storm." – East Asia & Pacific Update