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Does governing law affect bond spreads?

Dilip Ratha's picture

Conventionally the governing law should not affect the cost of borrowing in international markets. If it did, borrowers would use the cheaper jurisdiction. Also, if somehow the spread differed at the time of the launch of the bond, trading in the secondary market should eliminate the difference. A recent paper shows otherwise: Sovereign bonds issued under the UK law had a persistent higher spread than those under the US law, but only since the global financial crisis in 2008.

Historically, U.S. law issuances formed the dominant part of the volume of dollar-denominated central government bond issuances, barring 2012 when U.K. law issuances briefly overtook U.S. law issuances (Figure 1). There were also divergences in characteristics of dollar-denominated central government bonds issued across the two jurisdictions. Average spread at launch for bonds issued under U.K. law became distinctly higher after the global financial crisis in 2008 (Figure 2). On average, bonds issued under U.K. law also had weaker ratings and shorter tenors post-crisis.

Recent trends in national inequality – some encouraging signs though no room for complacency

Christoph Lakner's picture
This is the second of three blog posts on recent trends in national inequality.
 

The previous blog post in this series described the trend in the global and regional averages of national inequality for the period 1988-2013. Now we dig deeper into the trends in inequality at the country level. We describe changes in national inequality during two periods – around 1993 to 2008 and around 2008 to 2013. The long-run spells include all countries for which we have data on inequality around 1993 and 2008, and that data is computed using the same welfare measure (income or consumption). The short-run spells include countries for which we have inequality data around 2008 to 2013; this list is based on the World Bank’s Global Database of Shared Prosperity.

OPEC’S grip on oil prices may be slipping: A historical perspective

John Baffes's picture

The Organization of the Petroleum Exporting Countries (OPEC) unsettled oil markets in September when it announced it would resume placing limits on oil production among its members, effectively reversing two years of unrestrained production.

But how much control can OPEC really exert over prices? History suggests that formal agreements to influence the price of a particular commodity eventually fall apart. OPEC’s own history also shows that the short term benefits of managing supplies become long term liabilities. In addition, the oil producing landscape has changed dramatically in recent years with the advent of nonconventional producers, notably the U.S. shale oil industry. These factors will test the oil exporting organization’s power to influence markets.

Prices seen rising for oil and other commodities in 2017

John Baffes's picture

Prices for most commodities, including oil, are forecast to rise in 2017 as a long period of declining prices appears to be bottoming out, according to the October Commodities Markets Outlook.

Oil prices are forecast to rise to $55 per barrel next year from $43 per barrel in 2016 as markets readjust after an era of abundant supply that outpaced demand. Energy prices, which also include coal and natural gas, are forecast to jump 24 percent in the coming year. The decision in September of the Organization of the Petroleum Exporting Countries (OPEC) to resume limiting oil production is another important factor behind the higher price forecast.

Inequality in the typical country in the last 25 years – a strong increase followed by a recent decline

Christoph Lakner's picture

Also available in: Español | Français
This is the first of three blog posts on recent trends in national inequality.

Inequality has featured prominently in the public debate in recent times. Media outlets highlight the apparent surge in the incomes of the richest, many books have been written on this issue, and numerous academic studies have attempted to assess the nature and magnitude of inequality over time. Most studies of inequality focus on the extent of inequality within a country; this makes sense since most policies operate at this level, too. Despite the attention this issue has received, it has been constrained by the quality of data on inequality. Household surveys collected by national authorities around the world are the most readily available source of data on inequality. However, compiling and harmonizing household surveys from different countries is extremely difficult as they are not always collected consistently or frequently enough. It is also well-known that household surveys often fail to capture the top tail of the distribution, as we will discuss in more detail in a future blog.  

What is the impact of rural transformations on women farmers?

Vanya Slavchevska's picture

Rural areas are changing rapidly, but the shift does not affect women and men in the same way.

In the process of rural development and transformation, as employment for both women and men expands in other sectors, employment in the agricultural sector is expected to shrink. Yet delving through available data and the literature, we find that the reality isn’t quite that simple. In a great number of developing countries, as men move out of family farming, women tend to stay--or move out of the sector a lot more slowly. Many women even take on new jobs and responsibilities in agriculture. We call this phenomenon the ‘feminization’ of agriculture.

When does pollution policy work? The water quality and infant mortality impacts of Mehta vs. Union of India

Quy-Toan Do's picture
India’s rivers are heavily polluted. According to official estimates, 302 of 445 river stretches fail to meet even bathing criteria (Central Pollution Control Board [CPCB], 2014). This is known to have a heavy disease burden: each year, 37.7 million Indians are affected by waterborne diseases, 73 million working days are lost, and 1.5 million children are estimated to die of diarrhea alone (Water Aid, 2008). 
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Clear writing produces clearer thoughts

Paul Romer's picture
The oral tradition at the University of Chicago attributed the observation that “sloppy writing reflects sloppy thinking” to Milton Friedman. Of course, it echoes George Orwell’s claim that “the slovenliness of our language makes it easier for us to have foolish thoughts.”
 

Neither Friedman’s word “reflects” nor Orwell’s phrase “makes it easier” go far enough. The right verb is “produces.” Clear writing produces clearer thoughts. Sloppy writing produces sloppier thoughts. This is a natural consequence of the fact that anything stored in connections between neurons is part of a biochemical and electrical dynamic feedback loop. When we access one of these loops, we change it and connect it to other loops. To use an analogy from computer science, accessing neurons is never just a read. It is always a read and a rewrite.

Was the resource boom more akin to a resource curse for Africa?

Sudharshan Canagarajah's picture

The IMF’s Regional Economic Outlook (REO – April 2016) notes that the region’s dependence on primary commodities has increased since the 1980s with nearly half of the countries in the region subject to commodity price fluctuations. These economies, which contribute 70 percent of the GDP of Sub-Saharan Africa are facing a sharp slowdown in real growth, with many also having to undertake large fiscal retrenchments and/or seek balance of payments support from the IMF.

We review the economic performance of Sub-Saharan Africa’s (henceforth Africa) non-renewable resource producers since the early 2000s, the start of the commodity price boom contrasting this with the economic performance of Africa’s non-commodity exporters over the same period. The negative economic impact of the current slump in commodity prices is indisputable, but it is worth asking whether Africa’s non-renewable resource producers realized any tangible benefits from the commodity price boom. Our conclusion is that they did not, at least in terms of real per capita growth. And here’s why.

Do households use improved cook stoves? What are the benefits? An Ethiopian case study

Michael Toman's picture

About 40% of the human population, or about 2.8 billion people, find commercial fuels like electricity and gas inaccessible, too expensive or too irregularly supplied to use for cooking and heating (Smith et al., 2013; IEA, 2012).  Instead, they rely on solid fuels like coal, fuelwood, dung and charcoal that are combusted inside their homes (Jeuland and Pattanayak, 2012, Grieshop et al., 2011, Smith et al., 2013). Biomass fuels in particular are often self-collected and easy to use in inexpensive traditional stoves. This leads to severe public health problems, especially for women and children exposed to indoor smoke, and also can lead to forest degradation. Without major policy and/or technology changes, the global number of people depending on such fuels is projected to remain very large at least through 2030 (IEA, 2006, IEA and World Bank 2015).  
Improved biomass cookstoves that use less fuel and burn fuel more fully often are recommended as relatively affordable ways to deal with these concerns.

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