Debt Crisis Research Articles

Towards complete development finance data: Quantifying China's international education co‐operation and presence in the Global South

AbstractMotivationChina does not participate in the development co‐operation reporting mechanism of the Organisation for Economic Co‐operation and Development's (OECD) development co‐operation reporting mechanism, nor does it voluntarily publish overseas development finance data. Despite recent quantitative research on China's foreign aid to other sectors, such as health, no precedent exists for quantifying China's international education co‐operation (IEC).PurposeThis article will use AidData's Chinese Official Finance Dataset (AidData 2.0) to estimate the IEC using the OECD's internationally standardized definitions of development finance and frameworks for classifying IEC projects.Approach and methodsWe thoroughly examined all types of IEC projects, including official finance projects other than those that meet the definition of official development assistance (ODA). In our comparative analysis of educational aid between China and traditional donors, we focused on ODA‐like projects and examined the number of projects and funding amounts to determine China's IEC priorities.FindingsThe result shows that, between 2000 and 2017, China's IEC commitments totalled 1,524 education‐related international projects, representing 12% of the total international finance project portfolio, most of which are in Africa. Compared to the OECD framework, China prioritized higher education (n = 784, 51%) and education facilities and training (n = 244, 16%). An estimate of cumulative funding between 2000 to 2017 showed that China was the 10th largest donor of education aid to African countries, behind France, the World Bank, Germany, the United States, the EU, the United Kingdom, Canada, Japan, and the Netherlands.Policy implicationsThe findings of this study help our understanding of China's IEC finance. With China's involvement in education development aid growing in recent years and donors looking for solutions to developing countries' debt crises, this will allow for more effective collaboration, co‐ordination, and resource mobilization for both donor and recipient countries.

The impact of financial tightening on firm productivity: Maturity matters

We analyse how the combination of firm-level financial fragility and country-level financial constraints affects productivity growth in France, Italy and Spain. We first show that, although high leverage weighs on firm-level productivity in all three countries, more leveraged firms seem to suffer more from financial constraints only in Italy. In a second step, we show that this apparent specificity of Italian firms is related to the relatively short maturity of their debt. These results highlight the importance of liquidity constraints during periods of financial stress such as the Global Financial Crisis of 2008 or the European sovereign debt and banking crisis of 2011-13.

The Impact of Greek Debt Crisis on EU Integration and Its Enlightenment

As a very important member of the European Union, Greece has a very significant influence on the development of the European Union. The outbreak of the Greek debt crisis has a far-reaching impact on the process of EU integration. At the same time, the fiscal deficit and other economic and financial problems exposed by the Greek debt crisis have enlightenment for China and other countries. Therefore, it is of great research value to study the problems exposed in the Greek debt crisis and its impact on EU integration, and learn from these problems. This paper will first introduce the development process of the Greek debt crisis, then analyze its impact on EU integration, the way out of the Greek debt crisis, and finally discuss its reference significance to China and other places.

Dynamic spillover between crude oil, gold, and Chinese stock market sectors –analysis of spillovers during financial crisis data during the last two decades

The present study investigates the presence of asymmetric return spillovers among crude oil futures, gold futures, and ten Chinese stock sector markets. Time-varying asymmetric spillovers between commodities and the 10 sectors are shown by utilizing the spillover index developed by Diebold and Yilmaz (2012, 2014). Our findings indicate that the industrial and discretionary consumer sectors generate and benefit the most from spillovers. Furthermore, it has been established that the basic materials sector exhibits a net positive impact on spillovers. In contrast, oil futures, gold futures, and other sectors demonstrate a net negative impact as recipients of spillovers. Moreover, the negative return spillovers outweigh the positive return spillovers. Our analysis spans from 2000 to 2023 to include various financial crises. The spillover effects of asymmetry are impacted by various factors, including the global financial crisis (GFC), the European sovereign debt crisis (ESDC), the decline in oil prices, and the outbreak of the COVID-19 pandemic. Including gold and oil in individual equity markets can benefit equity investors. Furthermore, implementing hedging strategies is susceptible to the global financial crisis, economic slowdown, oil price decline, and the recent COVID-19 pandemic. The oil futures exhibit the greatest hedging effectiveness during the COVID-19 spread. The findings indicate that gold exhibits comparable outcomes solely in the presence of positive spillover effects. At the same time, its performance reaches its peak during the recovery phase in the context of negative spillover effects.

Dynamic linkage between environmental segments of stock markets: the role of global risk factors

ABSTRACT This study evaluates the links between representative indices of companies with high environmental performance and the propensity of such indices to economic and financial shocks. Five indices, representing environmental segments and four global macroeconomic and financial variables, were analyzed over a thirteen-year period, which included various crisis moments, such as the sovereign debt crisis, the COVID-19 pandemic and the onset of the Russia/Ukraine conflict. Using dynamic and nonlinear models, our research reveals statistically significant and consistent relationships between the variables under investigation, particularly during periods of global financial and pandemic crises. The analysis revealed that the VIXCLS is the most influential global risk factor, with certain risk factors being influenced by environmental segments, particularly Alternative Energy. This influence can create conditions conducive to contagion risk and diminish the benefits of portfolio diversification. This study contributes to a deeper understanding of the connection between environmental investments and their vulnerability to significant global events and risks.

Transformation of the role of the state in the regulation of economic processes through the prism of modern trends in the development of the world economy

The article aims to analyze the current trends in the development of the world economic system, identify the current risks of its development, and identify the vectors of transformation of the macroeconomic regulation system in the conditions of the departure from the state-centric paradigm. The influence of globalization processes on the mechanisms of regulation of economic processes and changes in the weight and scope of application of traditional macroeconomic policy tools are studied. In the structure of the risks of the development of the world economy, those that have the most significant long-term impact in case of untimely application of corrective strategies are identified, namely the threat of a large-scale debt crisis in developing countries, the risk of non-fulfillment of the Sustainable Development Goals. An analysis of the conceptual reasons for asymmetric economic development on the global market was carried out. The mutual conditioning of probabilistic events at the meta-level is shown. Based on understanding the mainstream nature of the tendency to move away from the state-centric paradigm, the erosion of national sovereignty and the formation of governmental and non-governmental international organizations of their sovereignty based on the alienation of objects of power from the state were investigated. Examples of the influence of non-state actors on the strategic directions of development of the world community as a whole and the national economic system represented by the Club of Rome and the IMF, are given. Identified factors affecting the country's place in the system of determining trends in geopolitics depend on several factors, including the country's image, the ability to mobilize human and material resources, independence in determining its goals and interests, the state's ability to form effective alliances and coalitions. It illustrated (based on the history of Ukraine's interaction with the IMF) the causes and consequences of the deliberate loss of autonomy and independence regarding decision-making regarding domestic economic policy and transformation into an object of world politics. Keywords: state regulation of the economy, macroeconomic regulation, world economy, globalization, sustainable development, economic policy, international organizations.

From Menace to Mundane: Moral Hazard and the Politics of the European Central Bank's Government Bond Purchases

AbstractDuring the Eurozone's sovereign debt crisis, the ideational consensus that shaped the foundation of Economic and Monetary Union (EMU) was destabilized by disagreement on unconventional monetary policies (UMPs), specifically government bond purchases. In the ECB's 2021 strategy review, however, UMPs were confirmed as standard elements of the European Central Bank's (ECB) toolbox. What happened? One argument frequently presented to question the legitimacy of UMPs is that they undermine the prior objective of the EMU of avoiding moral hazard. We analyse the politics of UMPs by focusing upon how top officials in four major Eurozone central banks have discursively constructed the relationship between the ECB's purchase of sovereign debt and moral hazard. We find that top central bank officials aligned to a large degree on the non‐necessary causal relationship between government bond purchases and moral hazard, which reinforced its legitimacy and eventual acceptance as ‘conventional’.

The asymmetric response of sovereign credit default swaps spreads to risk aversion, investor sentiment and monetary policy shocks

This paper investigates the determinants of sovereign credit default swaps spreads in the case of European countries. More specifically, it purposes to yield insight into how sovereign credit default swaps spreads respond to changes in investor sentiment, risk aversion, and monetary policy shocks during different market states. Using monthly data from May 2009 to December 2021 and running the quantile regression model, we show that risk aversion, investor sentiment and monetary policy affect the sovereign credit risk changes, and their effects vary across countries and markets states. More importantly, Risk aversion and monetary policy display the major asymmetric role in explaining CDS premia. However, limited asymmetric explanatory power is shown for investor sentiment. Furthermore, our findings demonstrate that the recent European debt crisis has significantly shaped the sensitivity of the sovereign credit risk spreads to the studied determinants. The findings of this study are helpful for investors in forecasting sovereign European credit spreads and hedging the countries default risk.

The Impact of Global Economic Policy Uncertainty on Global Grain Prices --Based on the TVP-VAR-SV Model

Grain products are essential for human survival and economies, and their price fluctuations significantly impact global economic stability. Recent frequent uncertain events have made global economic policy uncertainty a major factor in global food price fluctuations. This study choose European debt crisis, the COVID-19 pandemic, and the Russo-Ukrainian war as three typical type of uncertainty event. And used TVP-VAR-SV model to examine the impact of global economic policy uncertainty on the prices of beans, maize, rice, and wheat. The result shows policy uncertainty leads to fluctuating grain prices, with food grains (rice, wheat) and feed grains (beans, maize) reacting differently. And different types of uncertainty events have different effects, with the pandemic having the greatest effect. Finally, the paper suggests strategies for global food security, including improved information communication, policy control, early warning systems, stable economic policies, and supervision of the agricultural futures market.

Does BRRD mitigate the bank-to-sovereign risk channel?

We investigate the effectiveness of the Bank Recovery and Resolution Directive (BRRD) in mitigating the transmission of credit risk from banks to their sovereign, using CDS spreads to capture bank and sovereign credit risk for a sample of 43 banks in 8 Euro Area countries over the period 2009-2020. If the BRRD bail-in framework is credible, changes in bank default risk should not be transmitted to sovereign risk. In a novel approach we use banks earnings announcements to identify exogenous shocks to bank credit risk and investigate to what extent bank risk is transmitted to sovereign risk before and during the BRRD era. We find that bank-to-sovereign risk transmission has diminished after the introduction of the BRRD, suggesting that financial markets judge the BRRD framework as credible. The decline in bank-sovereign risk transmission is particularly significant in the periphery Euro Area countries, especially Italy and Spain, where the bank-sovereign nexus was most pronounced during the sovereign debt crisis. We report that the lower bank-to-sovereign credit risk transmission is associated with the parliamentary approval of the BRRD and not with the OMT program launched by the ECB to affect sovereign yield spreads, nor with specific bail-in or bailout cases which occurred during the BRRD era. Finally, we document that the reduction in risk transmission is most pronounced for banks classified as a Global Systemically Important Bank (G-SIB), stressing the importance of additional capital buffers imposed by Basel III.

Contagion and linkages across international currencies

This paper examines dynamic linkages among international currencies in the face of several turmoil episodes including the global financial crisis (GFC), eurozone sovereign debt crisis (ESDC) and the recent COVID-19 pandemic. We utilize weekly data from August 2005 till December 2022. Our empirical strategy consists of identification of crisis periods using a Markov-switching VAR, followed by estimation of the dynamic conditional correlations using an ADCC-GARCH model and testing for the impact of the crises using a regression model with robust standard errors. We compare impact of the episodes on the dynamic correlations across the currency pairs. Our findings suggest that correlation between developed economy exchange rates increased significantly during these episodes implying existence of a contagion effect. While significant negative correlation coefficients were observed across all pairs with Japanese Yen during GFC and ESDC, indicating flight to quality. We analyse factors that may be responsible for changes in co-movement of the currencies during the study period and find that financial stress, emergence of the pandemic and geo-political risk have a significant role to play.

Index for Public Administration Resilience Against Hybrid Threats

EU countries are dependent on the import of many raw materials. The geopolitical situation significantly impacts the European Union's raw materials policy. Hybrid threats are a serious challenge to security and stability in the world. They are very diverse in terms of actors, activities, or tools. The relationship between the EU's raw materials policy and hybrid threats is complex and influenced by a number of factors. In principle, however, it can be said that due to its dependence on importing raw materials from third countries, the EU is more prone to become the object of hybrid threats that these countries can use to promote their interests. The resistance of the public administration to hybrid threats is one of the important factors that can help the EU reduce the risk of threats to raw material policy by hybrid threats. The aim of the contribution is to create a new composite index, KAPA, which measures the resistance of public administration to hybrid threats. The proposed index has five dimensions – cybersecurity, resistance to disinformation, compliance with laws and security, protection against corruption, and prevention of a sovereign debt crisis. When constructing the KAPA index, we start from the apparatus of fuzzy sets. We have drawn all data from reputable, publicly available databases. According to the KAPA index, the countries ranked best are Estonia, Denmark, Finland, Sweden, and the Netherlands. The worst-ranked countries were Greece, Cyprus, Italy, Bulgaria, and Croatia. The results confirmed that fragile states, measured by the Fragile States Index FSI, are also more vulnerable to hybrid threats and have less resilient public administration.

Narrative triggers of information sensitivity

This research explores the factors contributing to information sensitivity in debt markets, focusing on the potential influences of uncertainty, economic performance, and journalist-dependent language. Building upon the foundational work of Dang et al. (Ignorance, debt and financial crises. Yale University Unpublished Working Paper, 2018), we analyze the mechanisms underlying the transition from information-insensitive to information-sensitive states—a shift with implications for potential financial crises. Leveraging machine learning techniques and daily data on variables such as default probability, information acquisition, and newspaper articles, we discern specific narrative triggers embedded within the news. Our analysis underscores the pivotal role of economic states and journalist language in inducing information sensitivity—a phenomenon intricately tied to different psychological thinking processes.

Off-balance-sheet policies to the rescue: The role of statistical expertise for European public–private partnerships

Off-balance-sheet policies are an important but understudied phenomenon that emerged from a technical subtlety in the calculation of public debt statistics. Taking the case of an exemplary European off-balance-sheet policy, public–private partnerships (PPPs), this paper analyzes the technocratic processes that allow the emergence of such debt-neutral instruments. In the aftermath of the sovereign debt crisis, off-balance-sheet policies have become an important policy tool for Member States in the European Economic and Monetary Union, enabling them to strike a balance between the perceived ‘public investment gap’ and the mantra of fiscal consolidation. The case study shows how the lack of political solutions to Europe’s investment-consolidation conundrum leaves it to technical experts to find workable solutions within the existing rules. The off-balance-sheet status of PPPs came under threat in 2014 but was reaffirmed through a coordinated effort by two strange bedfellows: the European Investment Bank (EIB), a promoter of PPPs, and Eurostat, the European authority responsible for public debt and deficit indicators. I argue that Eurostat and the EIB have entered into strategic cooperation to increase each other’s room for manoeuvre, diffuse political pressure and avoid bureaucratic overload. This paper contributes to a better understanding of the role of technocrats and their expertise, which shape the mutual relations between fiscal constraints and financialized investment policies in the European investor states.

SME’s bond issuance and access to bank credit: evidence from Italy

AbstractIn this paper, we rely on the information asymmetries framework and relationship lending theory to study how small and medium-sized enterprises (SMEs)’s access to bank credit improves after the issuance of a Minibond. Minibonds are fixed-income securities issued by SMEs aimed at supporting growth projects and refinancing operations. They were introduced by different European countries only recently, in response to the European sovereign debt crisis, which considerably constrained bank credit for SMEs.Using a representative sample of Italian companies that issued Minibonds in the 2012–2020 period, we find support to our hypotheses. Issuing Minibonds helps SMEs access higher amounts of debt and improves credit conditions in terms of cost of debt and debt maturity, but with some caveats: only Minibonds issued with lower interest rates and longer maturities lead to better access to credit. Moreover, we find that some companies more exposed to information asymmetries (i.e. younger), with better access to transaction lending (depending on their location) and with larger amounts of collateral available (i.e., tangible assets) benefit more from Minibond issuance.

An Analysis About the International Debt of Developing Countries: A Case Study About China, India and Ukraine

In recent five years, debt crisis has been a focus issue which the default of US debt has led to an overwhelming situation for many countries especially for developing countries. Additionally, subsequent effects of Covid-19 are still insisted that global economic still at a trough since the virus started to spread. There are many factors contributed to the trend of change in debt by country. Base on the dataset produced by world bank named international debt statistics last 5 years, using the method of quantitative analysis on analyzing China, India and Ukraine to find the factors that influence debt change in different countries. According to this study, it has found out that US debt crisis and the depreciation of US$ could be the main reason why the debt scale were decreased in final two years. However, Covid-19 is the cause which debt continue to increase. Government structure is also a factor affect the change in debt.

Manias, panics, & land: The property bubbles of the great Chinese crash of the 1880s

Historians researching China’s debt crisis of the early 1880s have largely focused on its stock market collapse of 1882-83. Yet the crisis was more than this—it was also a real estate crash. More precisely, the crisis entailed the bursting of two asset price bubbles in urban property: one in Hong Kong (1881), the other in Shanghai (1883). These boom-busts have long remained under-appreciated in both Chinese and global history. This article thus draws on what patchwork data exist, qualitative sources, economic theory, and global historical comparison to reconstruct their histories for the first time. That the crash was a property debacle in these globalising ports, not just a share selloff, suggests that it was no bout of speculation divorced from economic fundamentals, as some posit. Instead, the 1880s crash was a crisis that triggered a major depression, one inextricably bound up with late-Qing China’s integration into the global economy.

Consumer and business confidence connectedness in the euro area: a tale of two crises

Purpose The purpose of this study is to examine the propagation of consumer and business confidence in the euro area with a particular focus on the global financial crisis (GFC), the European sovereign debt crisis (ESDC) and the COVID-19-induced Great Lockdown. Design/methodology/approach The authors apply Diebold and Yilmaz’s connectedness framework and the improved method based on the time-varying parameter vector autoregressive model. Findings The authors find that although the evolution of business confidence marked the GFC and the ESDC the role of consumer confidence (mainly in those countries with stricter containment and closure measures) increased in the COVID-19-induced crisis. Originality/value The findings are related to the different origins of the examined crisis periods, and the analysis of their interrelationship is a very relevant topic for future research.

How to Deal with the Sovereign Debt Crisis in the Post-epidemic Era

Abstract This paper explores how developed and developing economies manage sovereign debt crises in the post-pandemic era, amidst a backdrop of inflation and slow growth. Fiscal and monetary stimuli in advanced countries increased global debt, with tighter monetary policy dampening domestic demand, weakening real economy investment, and diminishing the impact of expansionary fiscal measures. Developing nations face higher interest costs due to rate hikes by major economies, and adopting tight policies could lead to financial bubbles and underfunded real sectors. Inflation spikes exacerbate their debt burden, while diversified economies like Germany are more resilient compared to those heavily dependent on a single industry or foreign capital, as seen in Greece. Post-2023, central banks' shift to monetary easing eases debt burdens in advanced markets, boosts domestic growth, and provides capital inflows for emerging economies, reducing their debt servicing costs and crisis risk. Tackling the sovereign debt crisis requires international macro-policy coordination, with developed economies considering spillover effects on global economic stability. International support, such as debt relief, is vital to enhance resilience and sustainable development in vulnerable economies. All countries must tailor monetary and fiscal strategies to national conditions to navigate economic uncertainty and mitigate sovereign debt risks effectively. Keywords: Sovereign debt crisis, Industrial composition, External dependency, Financial stability, Debt sustainability.

Https://armgpublishing.com/journals/sec/volume-8-issue-1/article-5/

In the 21st century, various socio-economic crises have revealed that traditional economic science and (neo)classical thinking are unable to explain all the complexity of current economic problems, therefore the application of more complex and non-trivial economic concepts is gaining relevance. In addition to behavioral and evolutionary economic thinking, models of quantum economics have been developed in recent years, which allow solving economic problems, using mainly quantum thinking and the principles of quantum physics, in particular particle-wave dualism, the principle of uncertainty, the absence of a subject-object distinction, superposition and confusion. The article addresses 3 research questions (RQ). According to RQ1, the paper finds that quantum economics research is dominated by the following topics: quantum economics, quantum finance, quantum decision making, and quantum game theory. According to these four thematic descriptors, the article carries out a systematic modern review of scientific works in the period from 1978 to 2022 (if only 50 works were published in 1978-1999, then in 2000-2022 already 3430), with an emphasis on the most cited (Google Scholar) English-language journal articles. The analysis showed that articles on this topic are published mainly in journals of a non-economic profile, that the peaks of publication activity occur at times of powerful socio-economic upheavals (for example, the dot.com bubble, the substandard/financial crisis, the European debt crisis, the coronavirus pandemic, etc.). In accordance with RQ2, the article defines the key characteristics of the quantum economic model: in contrast to neoclassical economics (based on mechanistic classical physics, is rational and deterministic, with the help of the invisible hand of the market it leads to a stable equilibrium), the quantum approach, on the contrary, considers the economy as more complex, empirically oriented, uncertain, probabilistic, superpositional, as an archetypal example of a quantum social system that has its own versions of duality, measurement, and entanglement. According to RQ 3, the article determines to what extent quantum economics can update (neo)classical economics (integration of new ontological premises into economic thinking, more experimental and practical approach, connection between the concept of entanglement and sustainable development, management of financial risks based on the concept of quantum probability, rethinking the concept of randomness by quantum probability, introduction of quantum money, equilibrium using quantum games, etc.).