Crisis In Countries Research Articles

Conditioned solidarity: EU citizens\u2019 attitudes towards economic and social austerities for crisis countries receiving financial aid

During the European debt crisis, there has been a massive political debate between the EU institutions and the governments of crisis countries on the kind of austerity measures these countries have to accept in order to receive financial assistance from rescue funds established by EU and IMF. Based on a Weberian approach regarding solidarity as an act of mutual help, we interpret austerity measures as particular conditions of solidarity Alter has to agree to in order to receive assistance from Ego. In this paper, we ask to what extent citizens of EU countries agree on the notion of conditioned solidarity, and to which extent they are divided by socio-structural or cultural conflict lines, or by country particularities. Using unique data from the 2016 13 country ‘Transnational European Solidarity Survey’, findings show that the majority of respondents reject the idea of conditionality. Logistic regressions reveal rather weak attitudinal differences between respondents at the individual level, while at the country level respondents from countries with growing unemployment, higher unemployment rates, government debt, and poverty rates are in tendency more likely to reject the measures. We conclude that paying attention to the idea of conditionality is an important aspect of assistance measures in the future, if political actors look to avoid a lack of legitimacy among European citizens.

Public health policy and medical unionism in the context of collapse of Brazilian democracy

Abstract Issue This is a report about an editorial initiative to contribute to the debate on the crisis of trade unionism and public health in Brazil. Description of the Problem The Rio de Janeiro Doctors Union (SinMed-RJ), the first trade union of liberal professionals in Brazil, began its activities in 1927 and has completed nine decades. It kept present in the political life, in the process of drafting labor laws, subjected to the brutal intervention of security agencies during the military dictatorship, and in the street struggle for democratizing access to health in the 1980s. It is yet part of the history of the struggles for the re-democratization of the country and the construction of a universal public health policy. Together with The Brazilian Center for Health Studies (Cebes) it fights for the construction and consolidation of the Unified Health System (SUS) and the achievements of the 1988 Citizen Constitution, actions that had a major impact on the trade union and on public health. Results In 2017, the government that emerged from the 2016 judicial-parliamentary coup, made changes to labor legislation, destroying the legal framework for the defense of work and discontinuing the financial of trade unions. In 2019, we were witnessing the struggle of combative and socially based unions for the survival of their entities. The SinMed-RJ promoted debates on the role of the media in deconstructing democracy and the precariousness of medical work, while actively supporting the struggle of doctors in defense of their rights. Lessons Cebes and SinMed-RJ met against the privatization health, an important agenda of debate and action. From 2019, there had been a growing increase in measures to deconstruct public policies and labor protection, breaking the social legitimacy of state institutions, retracting the democratic space, deepening inequality and unemployment. This agenda is urgent to be widely debated for the whole society of a country in crisis. Key messages The major impact of this work was to include the public health challenges of Brazil in the agenda of the trade union, and to fight to rescue the democracy in Brazil. The major impact was to work with other institution on health studies and publish a special number of a free publication in honor of nine decades of the first union of liberal professional in Brazil.

Indicators of economic crises: a data-driven clustering approach

The determination of reliable early-warning indicators of economic crises is a hot topic in economic sciences. Pinning down recurring patterns or combinations of macroeconomic indicators is indispensable for adequate policy adjustments to prevent a looming crisis. We investigate the ability of several macroeconomic variables telling crisis countries apart from non-crisis economies. We introduce a self-calibrated clustering-algorithm, which accounts for both similarity and dissimilarity in macroeconomic fundamentals across countries. Furthermore, imposing a desired community structure, we allow the data to decide by itself, which combination of indicators would have most accurately foreseen the exogeneously defined network topology. We quantitatively evaluate the degree of matching between the data-generated clustering and the desired community-structure.

Macroeconomic adjustment in the euro area

Abstract Macroeconomic adjustment in the euro area periphery was more recessionary than pre-crisis imbalances would have warranted. To make this claim, this paper proposes a novel use of a Propensity Score Matching Model to produce counterfactuals for the Eurozone crisis countries (Greece, Portugal, Ireland, Cyprus, Spain) based on over 200 past macroeconomic adjustment episodes between 1960 and 2010 worldwide. At its trough, between 2010 and 2015 per capita GDP had contracted on average 11 percentage points more in the Eurozone periphery than in the standard counterfactual scenario. These results are not dictated by any specific country experience, are robust to a battery of alternative counterfactual definitions, and stand confirmed when using alternative estimation strategies, such as a Synthetic Control Model or a parametric dynamic panel regression model. Zooming in on the potential causes, the lack of an independent monetary policy, while having contributed to a deeper recession, does not fully explain the Eurozone's specificity, which is instead to be traced back to a sharper-than-usual contraction in investment and fiscal austerity due to high funding costs. These insights lend empirical backing to the proponents of more wide-reaching reforms of the Eurozone architecture, aimed at preventing some of these developments from repeating themselves.

Monetary Policy, Financial Regulation and Financial Stability: A Comparison between the Fed and the ECB in the Wake of the Global Financial Crisis

AbstractThe paper discusses in light of Austrian and Keynesian economic theory the impact of conventional and unconventional monetary policies as therapies for financial crises. It reviews the financial market stabilization measures of the Federal Reserve System and the Eurosystem in response to the US subprime crisis and the European financial and debt crisis. It shows that stabilization measures both in the US and the euro area are based on Keynesian thinking, whereas longer-term consequences of financial stabilization measures tend to be neglected. It is argued that the Federal Reserve System’s crisis measures were more directed towards stabilizing the banking system, whereas the European Central Bank first and foremost focused on debt sustainability of euro area crisis countries. In both cases, household credit growth remained under control despite renewed monetary expansion, while new imbalances emerged in the banking and corporate sector as suggested by Austrian economic theory.

Ukraine a country in crisis between Europe, Russia, and a complex electoral process

Abstract To this day, Ukraine is still experiencing difficult times both economically and politically. The economic and political crisis at the end of 2014, which led to the dismissal of President Yanukovich, meant that the territory of Crimea and, therefore, the port of Sevastopol as well, remained under Russian control. The new elections of 2019 carried a breath of fresh air and hope also for new relationships with Russia. The paper wants to photograph this situation and analyse the recent 2019 presidential elections.

States of Emergency

From 6 April to 26 May 2020, the Verfassungsblog and Democracy Reporting International Symposium reported on states of emergency and measures taken in response to COVID-19 in 74 countries, analysing legal measures and the use of emergency powers which impact nearly 80% of global population.The fifty days of the Symposium covered the height of the global legal reaction to the pandemic, offering a snapshot of countries in collective crisis. It began with a call for a global conversation on the kind of legal norms which should govern the situation of worldwide pandemic. This final contribution aims to trace the central themes, questions and issues raised by the Symposium. It considers constitutional safeguards on a ‘state of emergency’, and whether this is preferable to the use of ordinary legislation in managing a crisis. It examines the dangers of executive action, and whether countries have been successful in limiting the potential for abuse, as well as preventing or sanctioning it. It examines how states have struggled to maintain some degree of legislative and judicial normality, while other states have given it up entirely. It considers the relevance of trust and transparency of government action, and the concerns related to an approach driven by surveillance and sanction. Finally, it identifies the most successful approaches adopted, and the most detrimental. In doing so, it aims to form part of that global conversation which seeks to identify the most concerning legal developments in a global emergency, but also to advocate for the best practices emerging worldwide. Analysis is drawn from country reports and commentaries available at Verfassungsblog,The countries reports cover: Albania, Argentina, Australia, Austria, Bangladesh, Belarus, Belgium, Botswana, Brazil, Bulgaria, Cameroon, Canada, Chile, China, Colombia, Croatia, Cyprus, Czechia, Denmark, Ecuador, Egypt, Estonia, European Union, Finland, France, Georgia, Germany, Ghana, Greece, Guatemala, Hong Kong, Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Japan, Kenya, Latvia, Lithuania, Luxembourg, Malaysia, Malta, Mauritius, Mexico, Nepal, Netherlands, New Zealand, Nigeria, Norway, Peru, Philippines, Poland, Portugal, Romania, Russia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, United States of America, Venezuela, Vietnam

States of emergency [Blog post

From 6 April to 26 May 2020, the Verfassungsblog and Democracy Reporting International Symposium reported on states of emergency and measures taken in response to COVID-19 in 74 countries, analysing legal measures and the use of emergency powers which impact nearly 80% of global population.The fifty days of the Symposium covered the height of the global legal reaction to the pandemic, offering a snapshot of countries in collective crisis. It began with a call for a global conversation on the kind of legal norms which should govern the situation of worldwide pandemic. This final contribution aims to trace the central themes, questions and issues raised by the Symposium. It considers constitutional safeguards on a ‘state of emergency’, and whether this is preferable to the use of ordinary legislation in managing a crisis. It examines the dangers of executive action, and whether countries have been successful in limiting the potential for abuse, as well as preventing or sanctioning it. It examines how states have struggled to maintain some degree of legislative and judicial normality, while other states have given it up entirely. It considers the relevance of trust and transparency of government action, and the concerns related to an approach driven by surveillance and sanction. Finally, it identifies the most successful approaches adopted, and the most detrimental. In doing so, it aims to form part of that global conversation which seeks to identify the most concerning legal developments in a global emergency, but also to advocate for the best practices emerging worldwide. Analysis is drawn from country reports and commentaries available at Verfassungsblog. The countries reports cover: Albania, Argentina, Australia, Austria, Bangladesh, Belarus, Belgium, Botswana, Brazil, Bulgaria, Cameroon, Canada, Chile, China, Colombia, Croatia, Cyprus, Czechia, Denmark, Ecuador, Egypt, Estonia, European Union, Finland, France, Georgia, Germany, Ghana, Greece, Guatemala, Hong Kong, Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Japan, Kenya, Latvia, Lithuania, Luxembourg, Malaysia, Malta, Mauritius, Mexico, Nepal, Netherlands, New Zealand, Nigeria, Norway, Peru, Philippines, Poland, Portugal, Romania, Russia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, United States of America, Venezuela, Vietnam

The Application of The Economic Sustainable Accelerators (TESA) in the COVID-19 Crisis

This paper proposes an alternative production, distribution, and consumption platform for the case of COVID-19 crisis, this new platform is entitled Economic Sustainable Accelerators (TESA). The TESA is based on a strategical plan to reactivate the production, distribution, and consumption of any country in the present COVID-19 crisis. Before we proceed to implement TESA in any country, it is necessary to use twelve different modules of evaluation follow by (i) Module-1: COVID-19 infection cases geographical location; (ii) Module-2: Movement Control Order perimeters size; (iii) Module-3: Labour concentration and mobility systems, (iv) Module-4: Production priority plan; (v) Module-5: Transportation systems integral mobility; (vi) Module-6: Suppliers distribution; (vii) Module-7: Sanitation and Prevention strategic points; (viii) Module-8: Agriculture and Food Security; (ix) Module-9: COVID-19 Private and Public Partnership (public transportation controls, free health support, welfare programs, taxation exoneration), government spending controls; (x) Module-10: Industrial restructuration; (xi) Module-11: Services dynamicity; (xii) Module-12: COVID-19 Consumers opening levels mobility. The main objective of TESA is to offer policy-makers a new proposal to help countries to recovery faster from the COVID-19 crisis. The application of TESA is not limited to the study of a select group of cities. TESA, in effect, is a flexible and straightforward production, distribution, and consumption alternative platform. The third part of this paper shows a multidimensional diagram to explain how TESA can work in any country.

Stigma or cushion? IMF programs and sovereign creditworthiness

Policymakers in crisis countries often hesitate to enter IMF programs out of the fear that they trigger adverse reactions on financial markets. We explain why credit ratings and investor assessments are reliable measures of creditworthiness during crises, and examine how IMF programs affect them with three distinct identification strategies. The first strategy exploits the differential effect of changes in IMF liquidity on loan allocation as an instrument, the second uses the exact timing of program agreements, and the third provides text-based evidence from rating agency statements. When accounting for endogenous selection, we find that IMF programs help countries regain their creditworthiness. Even though IMF programs tend to result in economic contractions, the agreement on a program is perceived as a positive signal on financial markets. Our text-based analysis supports this signaling effect and suggests that the content of programs matters for how they are perceived.

Monetary Financing and Fiscal Discipline

Rules governing monetary state financing vary across jurisdictions. The mainstream rationale for bans of state financing rests on the empirical assumption that monetary financing undermines fiscal discipline. We address the plausibility of this assumption by estimating panel vector auto-regressive (VAR) models for euro area Mediterranean crisis countries over the period 2010-2018 to explore the reaction of the sovereigns’ fiscal position to a monetary policy shock. Our results suggest that fiscal discipline is not waning after an expansionary monetary policy innovation related to unconventional measures, as expressed through an improvement of the primary balance despite declining borrowing costs. While no compelling inferences can be made as to the driving force of this improvement – political pressure channeled through conditionality may be a plausible explanation – our results suggest that we can dismiss empirical claims on the adverse effect of unconventional monetary policy on fiscal discipline.

10 Migrants caught in crises: Contexts, responses and innovation

10 Migrants caught in crises: Contexts, responses and innovation

Will financial innovation transform pandemic response?

The mounting death toll from COVID-19 recently prompted The Guardian to declare, “The World Bank's $500m pandemic scheme accused of ‘waiting for people to die’”.1 Similarly, as the number of deaths from Ebola increased in the Democratic Republic of Congo (DRC), there was outrage in prominent journals. “The World Bank has the money to fight Ebola but won't use it” wrote Garrett in Foreign Policy.2 Others3–7 too describe the malfeasance of the financial innovation called the pandemic bond. Hailed by former World Bank president Jim Kim as an instrument that “would rapidly respond to future outbreaks by delivering money to countries in crisis”,8 critics judge the bond harshly, raising many points we agree with.

Foreign Demand and Local House Prices

We test whether foreign demand matters for local house prices in the US using an identification strategy based on the existence of “home bias abroad” in international real estate markets. Following an extreme political crisis event abroad, a proxy for a strong and exogenous shift in foreign demand, we show that house prices rise disproportionately more in neighbourhoods with a high concentration of population originating from the crisis country. This effect is strong, persistent, and robust to the exclusion of major cities. We also show that areas that were already expensive in the late 1990s have experienced the strongest foreign demand shocks and the biggest drop in affordability between 2000 and 2017. Our findings suggest a non-trivial causal effect of foreign demand shocks on local house prices over the last 20 years, especially in neighbourhoods that were already rather unaffordable for the median household.

The Political Economy of Bilateral Bailouts

AbstractIMF loans during times of financial crisis often occur in conjunction with bilateral financial rescues. These bilateral bailouts are substantial in size and a central component of international cooperation during financial crises. We analyze the political economy of bilateral bailouts and study the trade-offs that potential creditor governments experience when other countries find themselves in financial distress. Creditor governments want to stabilize crisis countries by providing additional liquidity, particularly if the crisis country is economically or politically important to them, but they are constrained by domestic politics. Politicians aim to balance these countervailing pressures. They provide bailouts when their own economy is exposed to negative spillover effects and when the crisis country is important for geostrategic, military, or political reasons. Domestic economic and political constraints, on the other hand, limit their ability to bail out other countries. We test our hypotheses using an original data set on bilateral bailouts by the G7 countries to countries that experienced financial crises between 1975 and 2010. The findings of our statistical analysis support our theoretical argument and contribute to a deeper understanding of international cooperation's complex structure during financial crises.

Foreign Demand and Local House Prices: Evidence from the US

We test whether foreign demand matters for local house prices in the US using an identification strategy based on the existence of 'home bias abroad' in international real estate markets. Following an extreme political crisis event abroad, a proxy for a strong and exogenous shift in foreign demand, we show that house prices rise disproportionately more in neighbourhoods with a high concentration of population originating from the crisis country. This effect is strong, persistent, and robust to the exclusion of major cities. We also show that areas that were already expensive in the late 1990s have experienced the strongest foreign demand shocks and the biggest drop in affordability between 2000 and 2017. Our findings suggest a non-trivial causal effect of foreign demand shocks on local house prices over the last 20 years, especially in neighbourhoods that were already rather unaffordable for the median household.

Unconventional Monetary Policy Shocks in the Euro Area and the Sovereign-Bank Nexus

We explore the effects of the ECB’s unconventional monetary policy on the banks’ sovereign debt portfolios. In particular, using panel vector autoregressive (VAR) models we analyze whether banks increased their domestic government bond holdings in response to non-standard monetary policy shocks, thereby possibly promoting the sovereign-bank nexus, i.e. the exposure of banks to the debt issued by the national government. Our results suggest that euro area crisis countries’ banks enlarged their exposure to domestic sovereign debt after innovations related to unconventional monetary policy. Moreover, the restructuring of sovereign debt portfolios was characterized by a home bias.

The Effect of TlTRO-II on Bank Lending

This paper studies the effect of central banks’ targeted refinancing operations on bank lending. It utilizes data from the European Central Bank’s targeted longer-term refinancing operations (TLTROs) together with monthly bank level balance sheet data from multiple countries. The effect of targeted policy is identified utilizing the institutional setting that provides natural instrumental variables and a proxy for credit demand. Unlike previous papers, this paper studies the effects on corporate loans and loans for consumption separately. The cumulative effect of TLTROs on participating banks’ stock of corporate loans is estimated to be significant (about 20 per cent). However, the effect on lending for consumption is found close to zero. Furthermore, the positive effects on corporate loans are found to be driven by crisis countries suggesting that the effectiveness of monetary policy depends on the economic conditions. The paper also finds some evidence that the effect on government bond purchases is negative. This result is very different from the earlier results regarding non-targeted liquidity operations.

Unconventional Monetary Policy Shocks in the Euro Area and the Sovereign-Bank Nexus

We explore the effects of the ECB’s unconventional monetary policy on the banks’ sovereign debt portfolios. In particular, using panel vector autoregressive (VAR) models we analyze whether banks increased their domestic government bond holdings in response to non-standard monetary policy shocks, thereby possibly promoting the sovereign-bank nexus, i.e. the exposure of banks to the debt issued by the national government. Our results suggest that euro area crisis countries’ banks enlarged their exposure to domestic sovereign debt after innovations related to unconventional monetary policy. Moreover, the restructuring of sovereign debt portfolios was characterized by a home bias.

Contagion through National and Regional Exposures to Foreign Banks during the Global Financial Crisis

Although the global financial crisis of 2008 took root in advanced economies, its shocks spread through emerging economies, reflecting the increasingly interconnected global financial system. In this paper, we test the contagion effect at the country level using bilateral data on bank claims between countries. Direct and indirect exposures of emerging economies to crisis countries are empirically measured by using bilateral foreign claims from the Bank for International Settlements, and whether these exposures matter for capital outflows from emerging economies is tested. The findings show that emerging market economies more exposed to banks in the crisis-affected countries, both directly and/or indirectly, suffered more capital outflows during the global financial crisis. We also find that an emerging economy’s financial vulnerability can be influenced by its region’s overall exposure to crisis countries, indicating contagion effects at the regional level. Evidence also suggests that same-region lenders exhibited more favorable behavior toward the regional borrowers during the crisis, with important policy implications.