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financial crisis

Making the Case for Financial Openness

Ryan Hahn's picture

Rich countries and emerging markets alike have participated in a rapid integration into global capital markets over the last 25 years. Proponents of financial globalization believed this would bring a myriad of benefits via improved financial intermediation, with a more efficient allocation of capital to productive firms and increased access to finance to those outside the halls of political power.

But the recent financial crisis has given pause to the pro-globalization advocates. The marked increase in capital flows to emerging markets quickly reversed in the wake of the financial crisis, leaving these countries looking vulnerable. Might the globalizers have gotten their prescriptions wrong?

A recent paper entitled Does Financial Openness Lead to Deeper Domestic Financial Markets? finds that, in fact, developing countries have reaped a number of benefits from financial globalization. In particular, the authors of the paper have found that greater financial openness:

The Fad of Financial Literacy?

Bilal Zia's picture

Financial literacy has become an immensely popular component of financial reform across the world. As a response to the recent financial crisis, the United States government set up the President’s Advisory Council on Financial Literacy in January 2008, charged with promoting programs that improve financial education at all levels of the economy and helping increase access to financial services. In the developing world, the Indonesian government declared 2008 “the year of financial education,” with a stated goal of improving access to and use of financial services by increasing financial literacy. Similarly, in India, the Reserve Bank of India launched an initiative in 2007 to establish Financial Literacy and Credit Counseling Centers throughout the country which would offer free financial education and counseling to urban and rural populations. The World Bank also hasn’t been missing out on the trend – it recently approved a $15 million Trust Fund on Financial Literacy. 

But what do we know about financial literacy? Does it work, and if so, through what mechanisms? Despite the money being ploughed into financial literacy programs, we know very little to address these important questions. While it is true that there is a large and growing body of survey evidence from both developed and developing countries that demonstrate a strong association between financial literacy and household well-being, we are still in the process of learning whether this relationship is causal.

A Governance Reform Message from Barney Frank

Sina Odugbemi's picture

The landmark piece of legislation that President Obama signed into law yesterday - The Wall Street Reform and Consumer Protection Act, 2010 - was a massive lift for all concerned. Students of governance always say that a crisis is one of the best opportunities for reform, yet the fact of the global financial crisis has not made the reform of financial services an easy lift in any country. And we all know why: banks are rich and they can hire the best lobbyists either to block or water down the reform. So, the reform process has been tough, but now we have the historic legislation.

Last Thursday night, Charlie Rose interviewed Barney Frank, the Chair of the Financial Services Committee of the US House of Representatives. Frank, together with Senator Dodd, his opposite number in the Senate, shepherded the new law through Congress over many tough months. Towards the end of the interview, Rose asked him to reflect on the lessons of the reform process itself. What had he learned? You might be surprised by one of the things he said; but, then, if you have been reading this blog, you might not be.

Here is what he said: 

The G20 tries to get hip

Ryan Hahn's picture

Usually, the term 'G20' induces images of interminable meetings and high-minded but vaguely worded communiques. But the G20 is trying to get hip. It is sponsoring a competition to crowdsource ideas for one of the perennial problems of development (and one greatly exacerbated by the financial crisis) -- access to finance by SMEs. Here are the details:

Re-reading Keynes

Editor's Note: Nadia Piffaretti is assistant and advisor to the Senior Vice President and Chief Economist, Development Economics.

“The world has been slow to realize that we are living in the shadow of one of the greatest economic catastrophes of modern history”. This could be the opening to any one of the dozens of Op-Eds appearing since the start of the crisis, but they are the words of J. M. Keynes from his 1930 piece The Great Slump of 1930.


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