Debt Cycles Research Articles

Characterizing public debt cycles: the non-negligible impact of financial cycles

Characterizing public debt cycles: the non-negligible impact of financial cycles

The Strategy and Effectiveness of Baitul Maal wa Tamwil in Eradicating Loan Shark Practices in Java and Sumatra

This study aims to analyze the role of Baitul Maal wa Tamwil (BMT) as an Islamic microfinance institution in eliminating loan shark practices in communities, particularly in Java and Sumatra. Loan shark practices persist due to the ease and speed of loan disbursement, despite the high interest rates that entrap small communities in difficult-to-escape debt cycles. BMT offers a fair and interest-free Islamic financing solution based on profit-sharing principles and a more inclusive approach. This study discusses BMT’s financing strategies, such as lenient requirements, fast processing, and financial education programs designed to compete with loan sharks. The main findings indicate that BMT plays a significant role in providing fairer financing access to small communities and helping reduce their dependence on loan sharks. However, this study also reveals several challenges BMT faces, such as limited capital, strict regulations, and low financial literacy among the public. These challenges hinder BMT's ability to effectively compete with loan sharks in terms of speed and accessibility. The results of this study emphasize the importance of strengthening BMT’s capital, developing human resources, and innovating Islamic financing products so that BMT can play a more prominent role in eradicating loan shark practices in the community. With the right strategy and support from various stakeholders, BMT has great potential to continue growing as a more equitable and empowering financing solution.

The Strategy and Effectiveness of Baitul Maal wa Tamwil in Eradicating Loan Shark Practices in Java and Sumatra

This study aims to analyze the role of Baitul Maal wa Tamwil (BMT) as an Islamic microfinance institution in eliminating loan shark practices in communities, particularly in Java and Sumatra. Loan shark practices persist due to the ease and speed of loan disbursement, despite the high interest rates that entrap small communities in difficult-to-escape debt cycles. BMT offers a fair and interest-free Islamic financing solution based on profit-sharing principles and a more inclusive approach. This study discusses BMT’s financing strategies, such as lenient requirements, fast processing, and financial education programs designed to compete with loan sharks. The main findings indicate that BMT plays a significant role in providing fairer financing access to small communities and helping reduce their dependence on loan sharks. However, this study also reveals several challenges BMT faces, such as limited capital, strict regulations, and low financial literacy among the public. These challenges hinder BMT's ability to effectively compete with loan sharks in terms of speed and accessibility. The results of this study emphasize the importance of strengthening BMT’s capital, developing human resources, and innovating Islamic financing products so that BMT can play a more prominent role in eradicating loan shark practices in the community. With the right strategy and support from various stakeholders, BMT has great potential to continue growing as a more equitable and empowering financing solution.

Low- and middle-income countries’ external debt cycle and global economic prospect

The rapid growth of peripheral countries has brought significant changes to the global economic and financial system, making it crucial to examine the relationship between their cyclical debt fluctuations and the world economy. Using the Bayesian dynamic factor model, this paper documents the presence of a set of common factors, known as global debt cycles, in the external debt accumulation of the low- and middle-income countries (LMICs). The interesting finding is that this debt cycles differ from well-known factors for global financial cycles in capital flows, such as U.S. monetary policy and global risk aversion. Even after controlling the factors for global financial cycles, our results reveal a significantly negative predictive effect of estimated debt cycles on global economic growth. Moreover, we demonstrate that this negative effect is primarily dominated by LMICs occupying prominent positions in international debt market networks, especially during the post-2008 financial crisis period. These findings emphasize the increasing importance of peripheral countries in the world system, which has been largely ignored in existing literature.

The perils of fiscal feedback rules

This paper introduces a fiscal feedback rule (FFR) in an endogenous growth model with public debt dynamics. We assume that part of the debt burden is covered by tax increases (we name this “sterilization”), while the remaining part is financed by issuing new debt. We show that while low sterilization does not ensure the existence of a long-run steady state, high sterilization can lead to multiple steady states and aggregate instability in the form of local and global indeterminacy, potentially condemning the economy to a low-growth/high-debt trap steady state and long-lasting public debt cycles. By combining econometric estimations and a calibration exercise on developed economies, we highlight that these various perils can occur for empirically plausible values of the sterilization coefficient.

A Study on the Status of Present Financial Inclusion Policy in the Districts of the State of West Bengal, India

Introduction: The convergence of financially excluded population towards mainstream formal financial institutions through proper accessibility, affordability and usage of services is crucial, to eradicate the dependence on informal money lenders, and to help the vulnerable and poor people to come out of the vicious debt cycle. As India aims to achieve inclusive growth, it has worked upon removing barriers from the path of gaining complete ‘Financial Inclusion (FI)’ through the policy called, Pradhan Mantri Jan Dhan Yojana (PMJDY). This has helped in translating Jan Dhan (wealth of people) to Jan Suraksha (security of people) through insurance and pension schemes, with the objective of building a global social security mechanism for every citizen. Objective: To analyse the status of the FI scheme (PMJDY) in the 23 districts of the state of West Bengal. Research Methodology: This research work will evaluate the effects of the current FI schemes, on the lives of the citizens of the state of West Bengal, which has 23 districts in total. To investigate about the inclusiveness in the financial system of those 23 districts, District FI Index (FII) has been developed, by considering some indicators for sub-indices as well as for composite index, that are clubbed under three dimensions, namely, accessibility, availability and usage of bank offerings. Earlier literature focused on savings and deposit accounts as a variable to compute FI whereas this study bridges the gap and considers only PMJDY scheme-based accounts to evaluate the present status of the scheme in the state. Findings and Conclusion: It is observed that Kolkata has secured the highest place in FII whereas other districts have shown relatively low FI. The state still has a long distance to travel in terms of achieving a complete FI but it has the capability of travelling at a faster rate due to well-developed banking infrastructure. Thus, to make the FI scheme effective, a developed and accessible banking structure is a pre-requisite. The success of this scheme in bringing the deprived and vulnerable section into the fold will not only increase savings and investment but also contribute to strengthening the human capital of the country.

Bridging the gap: enhancing socio-ecological resilience by breaking the debt cycle among small-scale hilsa fishers in Bangladesh

This study examines the plight of hilsa fishers in Bangladesh, grappling with challenges such as poor market access, scant capital, and shrinking fish stocks. This situation led to the seasonal dadon loan system, which provides immediate financial aid but often traps many fishers in a relentless debt cycle. We adopted a socio-ecological systems (SES) framework to examine the interconnected social and ecological dynamics of the hilsa fishery industry. Using a blend of quantitative surveys and qualitative interviews, we assessed the impact of the dadon loan system on small-scale fishers across four fishing locales in Bangladesh. The results indicate that the dadon loan system is a temporary financial prop for fishers but perpetuates debt cycles and curbs long-term financial security. Factors such as restricted access to formal credit, high fishing costs, and inadequate government support drive this system. This study identifies potential alternatives, such as government-backed loans, community finance schemes, and the promotion of alternative livelihoods, which could reduce reliance on the dadon loan system and improve fishers’ socioeconomic conditions. Implementing these strategies may dismantle the debt cycle, boost fishers’ welfare, and strengthen the socio-ecological resilience of fishing communities.

Subjective Income Expectations and Household Debt Cycles

Subjective Income Expectations and Household Debt Cycles

Subjective Income Expectations and Household Debt Cycles

Subjective Income Expectations and Household Debt Cycles

House price cycles, housing systems, and growth models

The paper provides a framework for theorising the role of house price cycles in national growth models. We synthesise Minskyan approaches with comparative political economy (CPE) by arguing that institutions influence the extent to which countries experience what we call ‘house-price-driven growth models’. First, we argue that house price dynamics have been undertheorised in existing growth models analysis. Finance-led models can be properly understood only against the background of rising house prices that stimulate consumption through wealth effects and investment through construction. Second, we identify behavioural and Minskyan theories of housing cycles as suitable frameworks to theorise the impact of housing on growth. However, this literature does not provide an analysis of cross-country differences in housing cycles. Third, drawing on the CPE literature on housing systems, we argue that factors such as private homeownership and mortgage-credit encouraging institutions can explain differences in the intensity of housing cycles. We provide preliminary empirical support for this framework from a cross-country analysis. Our results show strong cross-country heterogeneity in the intensity of housing cycles. Countries with more intense house price cycles also tend to exhibit more volatile business and debt cycles. Homeownership rates and mortgage-credit encouraging institutions are positively correlated with the volatility of house price cycles.

Wasted or Stolen Time: Squid Game, Debt, and Dispossession of Time

Abstract This article delves into the portrayal of the relationship between indebted individuals and disposable time in the South Korean Netflix TV series Squid Game (2021–present). It argues that the show illustrates how the debt-ridden, so-called unproductive members of society are denied the right to have disposable time and are excluded from moments of play and leisure and denied escape from their perpetual debt cycle. The analysis focuses on two pivotal moments: the recruitment of Gi-Hun and the persuasion of Oh Il-Nam to participate in the deadly game. In the final episode, Oh Il-Nam is revealed as the wealthy mastermind behind the Squid Game, highlighting the rich’s exploitation of the indebted individuals’ time for their own leisure and profit. The article concludes by suggesting an alternative perspective: considering time as stolen rather than wasted, prompting further contemplation on the complex dynamics of power, time, and exploitation depicted in Squid Game.

Sharia Economic Perspective on Online Loans Among Millennials

Online loans have become a significant phenomenon among millennials, especially in today's digital era. In the perspective of Islamic economics, online loans are an interesting topic for analysis. First, we will examine aspects of sharia compliance in online loan transactions. In Islamic economics, there are principles such as the prohibition of usury (interest) and gharar (uncertainty) that must be considered. In the context of online loans, it will be analyzed whether the loan mechanism and fees applied are in accordance with these principles. Second, we will look at the social and economic impact of online loans on millennials. Many millennials are experiencing financial difficulties and are using online loans as a quick solution. However, unwise use of online loans can have negative impacts, such as being trapped in a debt cycle that is difficult to overcome. In an Islamic economic perspective, it will be evaluated whether online loans provide long-term benefits for millennials and society as a whole. Third, alternative options will be discussed in an Islamic economic perspective that can be a solution for millennials in managing their finances. Concepts such as profit-sharing financing, term savings (mudarabah), and risk-sharing financial systems (takaful) will be studied as alternatives that are more in line with Islamic economic principles.

Finding Debt Cycles: QUBO Formulations for the Maximum Weighted Cycle Problem Solved Using Quantum Annealing

The problem of finding the maximum weighted cycle in a directed graph map to solve optimization problems is NP-hard, implying that approaches in classical computing are inefficient. Here, Quantum computing might be a promising alternative. Many current approaches to the quantum computer are based on a Quadratic Unconstrained Binary Optimization (QUBO) problem formulation. This paper develops four different QUBO approaches to this problem. The first two take the starting vertex and the number of vertices used in the cycle as given, while the latter two loosen the second assumption of knowing the size of the cycle. A QUBO formulation is derived for each approach. Further, the number of binary variables required to encode the maximum weighted cycle problem with one or both assumptions for the respective approach is made explicit. The problem is motivated by finding the maximum weighted debt cycle in a debt graph. This paper compares classical computing versus currently available (hybrid) quantum computing approaches for various debt graphs. For the classical part, it investigated the Depth-First-Search (DFS) method and Simulated Annealing. For the (hybrid) quantum approaches, a direct embedding on the quantum annealer and two types of quantum hybrid solvers were utilized. Simulated Annealing and the usage of the hybrid CQM (Constrained Quadratic Model) had promising functionality. The DFS method, direct QPU, and hybrid BQM (Binary Quadratic Model), on the other hand, performed less due to memory issues, surpassing the limit of decision variables and finding the right penalty values, respectively.

Impact of Blockchain Technology for Business and Information Systems: Automation of Inter-Company Debt Compensation Case Study

Debt compensation is a process via which various entities (companies, people, etc.) propose the payment of their mutual debts by compensating them according to the credits they may have in their favor. The aim is to establish the financial information of a company so that its debts can somehow be satisfied by its credits, breaking the vicious cycle of debts that cannot be paid. To this end, this financial information is retrieved from the business information system of a company, encompassing how much is owed and to which companies. From the retrieved information, this paper describes the implementation of an automatic system that allows calculating not only the debt cycles involving different companies, but also how these cycles can be effectively solved using blockchain technology thanks to the use of smart contracts. Blockchain technology can have a great impact for companies in this kind of application, guaranteeing the security and traceability of transactions among companies, which are two well-appreciated features from a financial auditing point of view.

How do income and the debt position of households propagate fiscal stimulus into consumption?

Expansions in public spending induce a surge of private consumption that is accompanied by increasing post-tax income of households, on average, during the U.S. postwar era. Endogenously reacting income, however, appears insufficient to fully rationalize conditional co-movement of private and public spending: private spending even expands in times during which disposable income does not rise, and for medium-income household groups that do not experience income gains. Corroborating these observations, we show within a SVAR-IV framework that fiscal stimulus causally prompts households to take on more credit. This favorable debt cycle is paralleled by dropping credit rates/spreads and inflating collateral prices, e.g., real estate prices, suggesting that softening borrowing constraints support the accumulation of private debt and help rationalizing the absence of consumption crowding-out.

Appetite for Treasuries, Debt Cycles, and Fiscal Inflation

Appetite for Treasuries, Debt Cycles, and Fiscal Inflation

Finding Debt Cycles: Qubo Formulations for the Maximum Weighted Cycle Problem Solved Using Quantum Annealing

Finding Debt Cycles: Qubo Formulations for the Maximum Weighted Cycle Problem Solved Using Quantum Annealing

Whisper by Chang Yu-Ko

Reviewed by: Whisper by Chang Yu-Ko Sean Guynes Chang Yu-Ko Whisper Trans. Roddy Flagg. Handforth, UK. Honford Star. 2021. 294 pages. HORROR FILMS FROM East Asia (especially South Korea and Japan) have impacted the cinematic genre for decades and made big business through both international releases and English-language remakes. East Asian horror fiction, by contrast, is almost nonexistent in the anglophone literary market. This mirrors a larger disjuncture between anglophone consumption of East Asian visual media and translation of fiction. But a few gems have appeared in recent years, including Mariko Koike’s The Graveyard Apartment (1993; Eng. 2016), Hye-Young Pyun’s The Hole (2016; Eng. 2017), and Yoko Ogawa’s The Memory Police (1994; Eng. 2019), the tip of a wave of intense literary horror fiction that continues now with indie publisher Honford Star’s release of Taiwanese writer Chang Yu-Ko’s English-language debut, Whisper—a gruesome yet thoughtful novel of ghosts, vengeful spirits, historical mystery, extreme inequality, and violent colonial pasts. Whisper opens on a sour note, following a day in the life of husband-and-wife pair Shih-sheng and Hsiang-ying as they drudge through shitty, low-paying jobs that offer no financial security but plenty of stress. Shih-sheng drives a taxi and spends all his money on booze and cigarettes, and his free time on abusing his wife, who works multiple jobs to make ends meet. Stuck in poverty after getting into a debt cycle specific to Taiwan’s medical and legal system, the couple sets the tone for a grim exploration of economic and social inequalities that Chang explores through the stark, nonmoralizing language of realism; until the spooky stuff starts, with Hsiang-ying tortured by a voice and visions that drive her life into disrepair and ruin. Stuck with debt, guilty over abusing his wife, and depressed by his social isolation (caused by his own behavior), Shih-sheng discovers that his wife’s hallucinations were caused by a ghost—one that has killed anyone who hears it for nearly a century. Chang’s novel is a realist noir whose entirely unlikable stand-in detective pursues a historical mystery that involves his own family and the colonization of Taiwan, first by Chinese, then Japanese imperial powers, resulting in the brutal murder of Indigenous peoples like the Bunun. In addition to Shih-sheng, Chang brings in perspective characters like Hsiang-ying’s social-climbing sister, a disturbing Buddhist priestess, and a social worker, who all collide with Shih-sheng in his frantic search for answers as he too becomes pursued by the ghost. Chang draws on Taiwan’s complex internal history as well as a mix of Chinese, Japanese, and Bunun folklore, and Buddhist and Shinto beliefs, allowing Whisper to reflect on how history undergirds contemporary social and economic inequalities, quite literally haunting the present. As a horror novel, Chang elevates the already familiar realist look at the neoliberal violence of daily life in contemporary East Asia with a deft interweaving of history-telling, personal narrative, and scenes of supernatural encounter that move between the tense and the terrifying with alarming ease. Though Chang is unknown in the anglophone world, Shih-sheng’s horrendous encounter with hallucinations of a Japanese woman contorted into an insect-like monstrosity, hanging on ceilings and pursuing him through the woods, will impress even diehard readers of the genre. Few authors are able to do so much with such a short novel, and to do justice to all the generic and critical elements at play (though I do think Chang’s B-plot about Chen-shan was rather weak). Not much scares me, but Whisper gave me a night of restless sleep, and I’m hopeful that its success will lead to more translations of East Asian horror and a long career for author Chang Yu-Ko. Sean Guynes Michigan State University Copyright © 2022 World Literature Today and the Board of Regents of the University of Oklahoma

Debt, distress, dispossession: towards a critical political economy of Africa’s financial dependency

SUMMARY With China's rise to become Africa's largest bilateral creditor, much research has focused on an evidence-based critique of the politicised narrative about China's supposed ‘debt trap diplomacy'. At a more fundamental level, this debate problematises the function of debt and related power differentials in late capitalism and calls into question development paradigms, notably the hegemonic infrastructure-led development regime, that have sustained Africa's financial dependency into the 2020s. As the International Monetary Fund is yet again shuttling between Addis Ababa, Lusaka, and Nairobi to resurrect fiscal discipline and to ensure debtor compliance for the post-pandemic ‘payback period', it is argued that (i) periodic cycles of debt financing, debt distress and structural adjustment are a systemic feature of the malintegration of Africa into the global capitalist economy, and (ii) critical research on the social costs and economic beneficiaries of renewed rounds of austerity and privatisation in Africa’s current debt cycle is needed.

Livelihoods and Vulnerabilities of Small-Scale Fishers to the Impacts of Climate Variability and Change: Insights from the Coastal Areas of Bangladesh

This study identifies the livelihood characteristics of small-scale fishers and how their livelihoods become affected through climate change-induced events, based on fieldwork in four fishing communities in lower Padma hilsa (Tenualosa ilisha) sanctuaries. To collect empirical data, several qualitative tools were employed, such as individual interviews, focus group discussions, oral history, and key informant interviews. A conceptual framework named Sustainable Livelihood Approaches (SLA) was used to analyze the data. The insights of the livelihood and climate vulnerability of small-scale fishers and fisheries management were addressed. The factors related to climate change included fluctuation of temperature and rainfall, frequent natural calamities, tidal inundation and outbreak of diseases. In addition, river pollution, alteration of migratory routes, poverty, malnutrition, debt cycle, social tension, stakeholder conflicts and lack of alternative earning flexibility made them more vulnerable. The current findings, derived from fishers' perceptions, are crucial for sanctuary's co-management, biodiversity conservation, planning and development of livelihoods of the small-scale fishers.