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Emerging Markets

Emerging market sovereign bonds: Does it cost more to issue a bond under the English law?

Dilip Ratha's picture

It seems it does. During 2008-2012, post-crisis, launching under English law increased spreads by more than a third on average. In other words, by choosing the UK law, a nation rated B+ (for example, Ecuador, Ghana, Greece, Pakistan and Zambia) apparently paid 7.7% interest rate per annum instead of 6 percent, and a nation rated BB (for example, Bangladesh, Nigeria, Serbia or Vietnam) paid nearly 5.7% instead of 4.5% (figure 1). Such an increase in spread is equivalent to a rating downgrade of 3 notches or more.

India: From BRICS to Fragile ‘n’ (and Back!)

Poonam Gupta's picture

India has covered a long distance in what seems like a short time. Once proudly reckoned as one of the BRICS countries, it is now making frequent headlines in the international financial press as one of the financially fragile countries (fragile 5, fragile 8, edgy eight etc.). Like many other emerging markets in the world, India is feeling the pinch of the global liquidity retrenchment and rebalancing on its exchange rate and capital flows.  Several observers have rationalized the investors’ behavior on account of the hard data on the Indian economy: growth has decelerated (from 8.9 % two years ago to 4.5 percent in fiscal year 2013), current account deficit is reigning high, inflation remains stubbornly high, and savings and investment rates have been falling. And all of this is happening amidst an upcoming national election, when elections anywhere invariably are associated with political and economic uncertainty.

What would it take for India to regain its place in a more revered acronym soon, rather than a less flattering fragile ‘n’ ensemble?

Calibrating 2014

Otaviano Canuto's picture

The global economy looks poised to display better growth performance in 2014. Leading indicators are pointing upward – or at least to stability – in major growth poles. However, for this to translate into reality policymakers will need to be nimble enough to calibrate responses to idiosyncratic challenges.

Walking on the Wild Side – Monetary Policy and Prudential Regulation

Otaviano Canuto's picture

Global financial integration and the linkages between the financial and the real sides of economies are sources of huge policy challenges. This is now beyond doubt, after what we saw in the run-up to and the unfolding of the 2008 global financial crisis. As a consequence, the established wisdom regarding monetary policies and prudential regulation has been subject to a deep critical review, including a demise of the belief that they should be maintained as fully independent functions.

Elephants and Macro-Financial Linkages

Otaviano Canuto's picture

Global financial integration and the linkages between the financial and the real sides of economies are sources of huge policy challenges. This is now beyond doubt, after what we saw in the run-up to and the unfolding of the 2008 global financial crisis.

Davos 2013: A Thief Stealing Bells Is Not an Optimist

Kevin Lu's picture

For the past five years, the participants to the Annual Meetings of the World Economic Forum (WEF) have gathered in Davos to discuss urgent global crises the world was facing: subprime lending, the credit crunch, banking, Greece, the euro zone’s woes, and so on. Soul-searching about the political and economic status quo ensued. This year, with leadership transitions in the two largest economies completed, the euro zone no longer facing imminent break-up, and China growing at 7.8%, Davos resumed some normalcy. Some even claimed optimism.

Some of the optimism is based on the growth prospects in Asia and China. For the past five years, while Europe has not grown at all, Chinese GDP has grown 60%. In this year’s Davos, there were no fewer than five public sessions on China, with topics ranging from its rapid growth, transformation of its growth model, and emergence of its soft power. Interests in Asia are high.

Is Shadow Banking Dangerous for You?

Otaviano Canuto's picture

payment bookFrom hedge funds to mortgage-backed securities, unregulated and risky activities have fallen out of favor since the Lehman Brothers debacle. Aggressive, casino-type behaviors and obscure transactions definitely played an important role in the run up to the financial crisis of 2008. But are all financial activities that operate outside the regular banking system bad?

The Influence of Greece's Debt Crisis on the Banking Sector

Sergio Schmukler's picture

The crisis in Greece and the Eurozone has escalated as depositors flee banks in fear not only of the consequences of sovereign default but also of Greece abandoning the Euro. Unfortunately, this development makes the crisis much deeper and more difficult to manage. As we (along with Eduardo Levy Yeyati) highlighted in a VoxEU piece in June 2011, the main risk of the Greek debt crisis was its potential spillover to the banking sector.

Prospects Weekly: First trade data released for September are not promising

First trade data released for September are not promising, with most countries reporting lower import volumes, suggesting that the risk of a worldwide deceleration in demand is real. Meanwhile with all three major rating agencies downgrading Spain’s long-term sovereign debt rating in the past few days, the sovereign credit quality-gap between developing and developed countries continued to narrow.

The Nuts and Bolts of Trade: Stepping up to Manufacturing in the Development Ladder

John Wilson's picture

With the global recovery slow to pick up speed, the latest World Economic Outlook (WEO) isn’t exactly an uplifting read. However, for those of us with an eye on the developing world there are some bright spots: the low-income-countries (LICs) in Africa, for example, have returned to their pre-crisis growth rates and their economies are expected to expand by a respectable 6.5 percent in 2012. 

Despite this seemingly good news, there are some dark clouds on the horizon. The WEO attributes the quick rebound to the fact that the African LICs were, “largely shielded from the global financial crisis owing to their limited integration into global manufacturing and financial networks.”  Although limited international exposure is a boon in the short-term, it also signals trouble down the road.


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