Syndicate content

financial crisis

Reforming Global Finance: What is the G20 Missing?

Franklin Allen's picture

Editor's Note: Professor Franklin Allen came to the World Bank on October 27 to give an FPD Chief Economist Talk on the topic of Reforming Global Finance: What is the G20 Missing? Please see the FPD Chief Economist Talk page to download a copy of his presentation and watch a video of his Talk.

The recent financial crisis clearly had more than one cause. My view is that the most important one was a bubble in real estate prices, not only in the US but also in a number of other countries such as Spain and Ireland. It was the bursting of this bubble that has led to so many problems in the world economy. A significant part of this is a direct effect on the real economy rather than an effect transmitted through the financial system. For example, Spain had one of the best regulated banking systems and its banks did much better than in other countries. Yet with a doubling of its unemployment rate to 20 percent, its real economy has been devastated. In contrast countries like Germany that did not have a real estate bubble but had much larger drops in GDP have not suffered nearly as much. Germany's unemployment rate is now lower than at the start of the crisis.

Diaspora bonds for development financing during a crisis

Dilip Ratha's picture

On September 16 Greece announced that it plans to issue a diaspora bond. In the past the governments of India and Israel have raised over $35 billion dollars, often in times of liquidity crisis. Preliminary estimates suggest that Sub-Saharan African countries can potentially raise $5-10 billion per year by issuing diaspora bonds. Countries that can potentially consider diaspora bonds are Bangladesh, Colombia, El Salvador, Ghana, India, Jamaica, Kenya, Mexico, Morocco, Nepal, Nigeria, Pakistan, Philippines, Romania, Senegal, South Africa, Sri Lanka, Uganda, Zambia, and Zimbabwe (and also Greece, Ireland, Italy, South Korea and Spain). 

The Chrysler Effect: The Impact of the Chrysler Bailout on Borrowing Costs

Deniz Anginer's picture

Did the bailout of Chrysler by the U.S. government overturn bankruptcy law in the United States?

Almost two years ago, the outgoing Bush and incoming Obama administrations announced a series of steps to assist Chrysler, the struggling automaker, in an extraordinary intervention into private industry. The federal government intervened in Chrysler’s reorganization in a manner that, according to many analysts, subordinated the senior secured claims of Chrysler’s lenders to the unsecured claims of the auto union UAW. As one participant interpreted the intervention, the assets of retired Indiana policemen (which were invested in Chrysler’s secured debt) were given to retired Michigan autoworkers.

Critics claim that the bailout turned bankruptcy law upside down, and predicted that businesses would suffer an increase in their cost of debt as a result of the risk that organized labor might leap-frog them in bankruptcy. A long-standing principal of bankruptcy law requires that a debtor’s secured creditors be repaid, in full, before its unsecured creditors receive anything.

The Impact of the Crisis on New Firm Registration

Leora Klapper's picture

With millions around the globe feeling the impact of the financial crisis and slower economic growth and job losses, it is important to understand regulatory and policy constraints on entrepreneurs wanting to start a formal business. Entrepreneurial activity is the basis of sustainable economic growth, and the first step for entrepreneurs joining or transitioning to the formal sector is the registration of their business at the registrar of companies. For evidence of the economic power of entrepreneurship we need look no further than the United States, where young firms have been shown to be an important source of net job creation, relative to incumbent firms (Haltiwanger, et al.).

To measure entrepreneurial activity, we’ve constructed with support from the Kauffman Foundation the World Bank Group Entrepreneurship Snapshots (WBGES) – a cross-country, time-series dataset on new firm registration in 112 countries. The main variable of interest is “Entry Density”, defined as the number of newly registered limited liability firms as a percentage of the working age population (in thousands). We employ annual figures from 2004 to 2009 collected directly from Registrars of Companies and other government statistical offices worldwide. Like the Doing Business report, the units of measurement are private, formal sector companies with limited liability.

34 million jobs lost

Ryan Hahn's picture

The most recent ILO estimates—from January of this year—put global job losses between 2007 and 2009 at 34 million. This, of course, is on top of the many people who continue to have a job but have seen their hours (and wages) slashed. Some persuasive research indicates that reduced hours was more of an issue than outright job losses in middle-income countries.

Welcome to ‘Let’s Talk Development’

Justin Yifu Lin's picture

As the world pulls out of an unprecedented financial crisis and given the wrap up just last week of the Millennium Development Goals Summit in New York, the work of the development community is far from over. In this context, the need for concerted, pragmatic research is more urgent than ever. Among the questions we need to ask is why many past efforts to get low-income countries on a path to sustainable growth have fallen short. Also, as we search for solutions, we need to adapt to the emergence of a multi-polar growth world and seek lessons from developing countries.  

With this in mind, it’s my pleasure to introduce this new blog aimed at sharing ideas and sparking innovation.

  Field visit to Nigeria
We at the Development Economics Department of the World Bank know that openness is what will keep us relevant and honest – the world is changing and it’s vital to challenge accepted wisdom. It’s essential to air the views of outside experts, even when they are highly critical.

Lively debate via this blog could potentially lead to break through solutions for development, or, at the very least, steer research and analysis in new directions.


Pages