Global Financial Crisis Research Articles

Comprehensive assessment of the financial sustainability of local budgets in conditions of decentralization

Initially the global financial and economic crisis, decentralization processes in many countries, and further the coronavirus pandemic, as well as the war in Ukraine have increased interest in the concept of financial health, financial condition and, more specifically, in the financial stability of local authorities. A system of indicators for a comprehensive assessment of the financial stability of local budgets has been proposed and substantiated in this article based on the previously conducted analysis of existing scientific approaches to assessing the financial stability of budgets. The determined methodology was tested on the basis of the data of territorial communities of Transcarpathian Region (Ukraine) for 2021.

On Some Ways to Mitigate the Macroeconomic Policy Trilemma

The choice of a macroeconomic policy in an open economy is constrained by a trilemma in which only two of the following three policy goals can be achieved at the same time: exchange rate stability, monetary independence, and capital mobility. The constraints on economic policy imposed by this trilemma have been confirmed in both theory and practice for more than sixty years. Central banks are nevertheless forced to seek some compromise that will relax those constraints. The economic literature has proposed various tools and mechanisms for making them less rigid and facilitating central banks in reaching their policy goals, an especially urgent concern for developing countries. The tools that have been offered were effective before the global financial crisis, but this study shows that they have now lost their usefulness because global economic trends linked to capital flows, exchange rate stability, and debt dynamics have changed. The paper assesses the effectiveness of the best-known instruments for easing the trilemma, such as accumulating large foreign exchange reserves and foreign exchange interventions by monetary authorities that partially substitute for capital controls. A new approach based on the ratio of short-term external public debt to a country’s foreign exchange reserves is proposed. The conclusion is that decreasing the ratio of debt to reserves makes the restrictions imposed by the trilemma less harsh and also enables fuller realization of macroeconomic policy goals, an outcome confirmed by data from developing economies after the financial crisis.

Quantitative modeling of the relationship between Basel III Capital Buffers and key strategic solutions: A case study of commercial banks in Vietnam

The Basel III Capital Buffers were introduced by the Basel Committee on Banking Supervision after the 2008 global financial crisis to strengthen global bank stability by providing additional capital layers that can absorb potential losses and manage excessive credit growth. In Vietnam, the implementation of these buffers has presented considerable challenges, especially for commercial banks, where tailored solutions must be customized to align with the unique scale, structure, and characteristics of each institution. This article examines the impact of various strategic approaches on implementing Basel III Capital Buffers in Vietnamese commercial banks. The regression research model employs a 5-level Likert scale, using a questionnaire of 6 variables representing 40 distinct indicators, in a survey conducted across 115 banking institutions in Vietnam. The findings reveal that strategies for capital increases through securities issuance, reinvestment from business activities, and system upgrades significantly influence buffer implementation. Securities-related capital increases have the most significant effect, followed by system upgrades and business reinvestment. In contrast, delays in state capital injections and persistent operational challenges hinder progress. The study offers practical recommendations to enhance Basel III compliance in Vietnam by optimizing capital management strategies and addressing key implementation barriers to ensure the long-term resilience of the banking sector.

National Culture, Institutional Quality, and Financial Development: International Evidence Before and After Financial Crisis

This study examines the impact of Hofstede’s six cultural dimensions and institutional quality on financial development in the periods preceding and following the global financial crisis. The study analyzes data from 33 countries spanning 2001 to 2021 using a combination of OLS, two-stage GMM, and PVAR models and concludes that inflation and economic growth negatively, and exchange rate and institutional quality positively significantly enhance financial development. Countries characterized by low masculinity and uncertainty avoidance scores, alongside high individualism and indulgence scores, tend to exhibit greater financial development. The results also indicate that cultural factors ought to be regarded as dynamic modifiers of financial development. National culture and institutional quality have a consistent influence on financial development pre- as well as post-crisis periods. Policymakers must recognize the significance of both formal and informal institutions in fostering an environment that promotes financial development and growth. A strategic integration of diverse cultural identities and values will confer a competitive advantage to nations. The effective management of cultural diversity and openness is crucial for attracting new investment, fostering innovation, comprehending the needs and skills of the workforce, and promoting financial development.

Key determinants of sales price in the residential developments in Prague

PurposeThe real estate residential market plays a crucial role in the economy and personal savings of a significant portion of the population. In recent years, the pricing of new apartments in Prague and other major European cities has experienced rapid growth but also a sharp decline during the global financial crisis of 2008. The purpose of this paper is to describe the relationship between the selling price per square meter of new residential developments in Prague and the macroeconomic determinants, as well as real estate sector variables.Design/methodology/approachThe econometric model developed for this study is based on quarterly observations from 2005 to 2021 and utilizes statistical learning (SL) techniques of lasso regularization combined with Bayesian model averaging (BMA).FindingsThe primary objective is to employ the model to identify the main determinants and provide insights into the price dynamics of new residential units. The outcomes of the model suggest that the set of variables selected in this paper – Net disposable income per household, Prague GDP per capita, Unemployment rate, Mortgage Interest rate and Covid dummy variable – provides a good explanation of the developments in real estate prices in Prague.Practical implicationsThis model can be reproduced also for other European capital cities and can be tested. Our goal is to expand this model also for the data in Warsaw and to update the data and model annually. The model’s high explanatory power (over 90% of variance explained) suggests that it can serve as a strong foundation for future forecasting models, though this was not the primary focus of our current analysis. We believe that this model can be used well for the prediction of residential price developments in Prague or other European capital cities.Social implicationsIn the current situation where the affordability of housing is becoming a more and more important policy topic, we strongly believe that a model like ours, that explains the price development can be helpful in explaining price movements and helping to understand changes in housing prices (thus affordability) in connection to the macroeconomic variables.Originality/valueThis paper is bringing a very long data series on the residential price of the new developments in Prague that were constructed in the early 2000s. Compared to the other research papers studied where the dependency of residential price is tested on only a few variables, in our model, we tested large scale of explanatory variables using SL techniques of lasso regularization combined with BMA. Our paper focuses on the price of new apartments, whereby most of the literature studied prefers the housing price (family homes) or apartment price including both primary as well as secondary markets.

Effects of Financial Development on Investments: New Evidence Considering Different Aspects of Financial Development

ABSTRACTThis paper provides new evidence and insights about the finance‐investment nexus by assessing and comparing the impacts of different aspects of financial development on investment. The study uses data for 88 countries from 1996 to 2019, and the estimates are based on dynamic panel data methodology. Once the global financial crisis changed several structures, we also run regressions for the periods before and after the crisis to check whether the relationships change. Furthermore, to verify whether the results are not distorted by developed countries, the models are estimated for the full sample and for a sample of developing countries. The results reveal that higher levels of financial development are associated with higher levels of investment. In particular, the development of financial institutions depth and access to financial markets appears as the most important financial development variables for investments. The results also indicate that, after the global financial crisis, there was a change in the importance of the effects, increasing the impacts of financial development in terms of access to institutions and depth of institutions.

How US Treasuries Can Remain the World’s Safe Haven

Weaknesses in the design of the market for US Treasuries have reduced the effectiveness of world's favored safe-haven asset. Since the Global Financial Crisis, the market's intermediation capacity is far more constrained by the balance sheets of dealer banks, which handle virtually all investor trades. Since 2007, the total size of primary dealer balance sheets per dollar of Treasuries outstanding has shrunk by a factor of four. This trend continues because of large US fiscal deficits and post-GFC regulatory capital constraints, which are necessary for financial stability but limit the provision of liquidity under stress. For US Treasuries to remain a powerful safe haven, the intermediation capacity of the market will need to be expanded and further supported by official-sector backstops.

Dividend Taxation and Firm Performance with Heterogeneous Payout Responses

We analyze the performance of firms that were differentially affected by an unexpected tax on dividends before the global financial crisis. We use exogenous policy variation for firms with different legal statuses and financial year-end dates to separately identify the policy announcement and implementation effects. We provide causal evidence for a sharp drop in dividends but zero change in equipment purchases. Treated firms accumulate investment goods that are likely to be owner-manager’s personal assets instead of productive capital. At a time of severe liquidity shortage, some of the funds kept in the firm are used to pay back short-term debt. (JEL G01, G31, G32, G35, H25, K34)

“Feeling Stressed?” A Critical Analysis of the Regulatory Prescribed Stress Tests for Financial Services in the UK

This paper captures a qualitative review of the regulatory prescribed stress tests for UK financial services designed by the Bank of England and the Prudential Regulation Authority (PRA)/Financial Conduct Authority (FCA) after the Global Financial Crisis. It presents a critical analysis of the use of stress testing as part of supervisory practices for UK banking institutions and insurance undertakings, commenting on their qualitative characteristics, after looking at the regulatory prescribed stress tests from three key categories: the macroeconomic scenarios for banks, denoted as the bank stress tests (BST), the insurance stress tests (IST), and the biennial exploratory scenarios (BES). In this study, five trends describing regulatory prescribed stress are identified: (1) the regulatory collaboration, (2) cross-industry stress tests, (3) exploratory scenarios, (4) reporting and disclosure requirements, and (5) the underlying modelling capabilities and tools. The associated challenges of (A) governance, (B) frequency, (C) individual disclosures, (D) data and modelling, and (E) capabilities and skillset from participating institutions underpinning these stresses are highlighted, shaping the policy recommendations for future exercises. These address the gaps identified from existing stress tests towards the effective prudential supervision of UK financial services, based on each scenario category, for improvements and advances to practices.

Interconnectedness of Stock Indices in African Economies Under Financial, Health, and Political Crises

This study examines the interconnectedness of African stock markets during three major global crises: the 2008 Global Financial Crisis (GFC), the COVID-19 pandemic, and the Russia–Ukraine conflict. We use daily stock index data from 2007 to 2023 for ten African countries and apply a Time-Varying Parameter Vector Autoregressive (TVP-VAR) model. The results reveal that volatility connectedness among African markets intensified during all three crises, peaking during the COVID-19 pandemic followed by the 2008 GFC and the Russia–Ukraine conflict. Short-term connectedness consistently exceeded long-term connectedness across all crises. South Africa and Egypt acted as dominant transmitters of volatility, highlighting their systemic importance, while Morocco showed increased influence during the COVID-19 pandemic. These findings suggest that African markets are more globally integrated than previously assumed, making them vulnerable to external shocks. Policy implications include the need for stronger regional financial cooperation, the development of early warning systems, and enhanced intra-African investment to improve market resilience and reduce contagion risk.

From entrepreneurial to managerial statecraft: New trends of urban governance transformation in post-pandemic China

The global financial crisis started a new context of late capitalism and austerity urbanism. Instead of a unidirectional governance transformation towards entrepreneurialism, rising finance and financialisation, pervasive state roles in state capitalism and post-growth municipal radicalism are competing trends. Previously, China witnessed private entrepreneurship, economic devolution, and housing commodification at the turn of the millennium. They have been portrayed as urban or state entrepreneurialism. These governance features were transformed as China entered Xi Jinping’s new era. This paper revisits the transformations in post-pandemic China and finds that rising state capital, re-centralisation of spatial governance and party-state co-governance represent the shift from entrepreneurial to managerial statecraft. The new trends broadly echo changing capital–state–society relationships in the world today. Beyond market rationality, the state mobilises capital and society to pursue strategic intentionality. The transformation has been exacerbated by pandemic urgency, post-pandemic economic downturn and greater geopolitical tension.

Determinants of Firm’s Capital Structure in Indonesia

The determination of capital structure has been a focal point of finance research for over six decades, yet it remains a complex and controversial topic, particularly in emerging markets like Indonesia. This study seeks to address a key gap in the literature by examining the firm-specific factors such as profitability, tangibility, growth opportunities, liquidity, and business risk that influence capital structure decisions among Indonesian firms. Despite existing knowledge, limited empirical research specifically addresses the unique financial dynamics of Indonesian firms, many of which rely heavily on debt due to restricted access to equity markets and the prevalence of family-owned enterprises. This reliance on debt raises concerns about financial stability, particularly in light of risks underscored by the Global Financial Crisis of 2008. Using data from public companies listed on the Indonesian Stock Exchange between 2014 and 2023, this study employs panel data regression and multiple regression analysis to investigate these factors. The significance of this study extends beyond academic contribution, offering valuable insights into financial management, policymaking, and investment strategies. By clarifying how firm-specific factors influence capital structure, this research provides practical guidance for financial managers to develop effective financing strategies. Furthermore, it assists policymakers in creating a supportive regulatory environment for businesses and helps investors make informed decisions. Ultimately, this study enhancing financial literacy and stability within Indonesia's growing economy.

Decoding the Drivers of Pakistan's FDI Story: The Role of Democracy

With an emphasis on foreign direct investment (FDI) inflows, research on Pakistan's democracy and political corruption can guide policy decisions, and promote sustainable growth by finding viable areas and avoiding risks. Utilizing up to date data, time series data from 1992 to 2021 the study documents significant historical shifts, including the COVID-19 pandemic, the 2008 global financial crisis, the energy crisis, the China-Pakistan Economic Corridor, the war on terror, US sanctions, and the war on terror. The objectives are to find how FDI inflows respond to democracy in Pakistan and to provide valuable policies for the future. The stationarity of variables is checked by using an Augmented Dicky Fuller (ADF) test. The results of the ADF test show that stationarity in variables is at I(0) and I(1). It justifies the use of an autoregressive distributed lag model (ARDL). The results obtained through the ARDL model reveal that democracy has a positive impact on FDI. It also empirically proves the short-run result convergence towards the long run. Pakistan's democracy faces obstacles such as economic downturns, corruption, and military takeovers. To improve FDI inflows it's required to support a democratic regime, expand trade openness, and strengthen investor protection.

COVID-19 as a key driver of Public Financial Management [PFM] reforms in Botswana

ABSTRACT An effective Public Financial Management (PFM) system is essential to a functioning government. Therefore, PFM systems must be continually reformed to ensure economic growth and development. Crises such as global financial crises and the COVID-19 pandemic provide a heightened impetus for PFM reforms. In this regard, the 2007–2009 global financial crisis actuated governments to introduce PFM reforms and COVID-19 necessitates a similar fiscal response. The overarching aim of this paper was to discuss ongoing PFM reforms in Botswana and propose ways to recalibrate the same to deal with COVID-19 fiscal challenges. This is a qualitative desktop study which used secondary data sources. Data analysis was in the form of document review and analysis. The paper concluded that PFM reforms are not COVID-19-centric, hence, they need to be recalibrated. Finally, a key general policy implication emanating from the Botswana case study is the imperative need to inaugurate COVID-19-centric PFM reforms.

Volatility Spillovers and Comparative Analysis of Conventional and Islamic Equity Markets During Global Financial Crisis and Covid-19 Pandemic: Empirical Evidence from Malaysia

This study investigates the co-movement and integration between conventional and Islamic indexes in Malaysia by analysing the volatility spillover and asymmetric effect over the period of 28/2/2007 to 28/2/2023. The sample is divided into five periods: full sample period, pre-, during- and post-Global Financial Crisis period including the during-COVID-19 period. Based on GARCH-M and EGARCH models, the findings indicate that the volatility of every index is more responsive to its lag values than it is to new shocks with the Islamic index consistently demonstrating higher volatility persistence than its conventional counterpart. The EGARCH results also observe asymmetric bidirectional volatility spillovers between Malaysia’s conventional and Islamic index in the during-GFC period. However, unidirectional volatility spillover is found in every sample period, except for the during-COVID-19. This indicates the absence of return and volatility spillover, which makes COVID-19 a special/unique event for Malaysia. The overall findings support the decoupling hypothesis for Malaysian conventional and Islamic indexes. Hence, it is important for policymakers in developing policies to deal with the co-movement and spillovers of the indexes for achieving financial stability. This study suggests that domestic investors in Malaysia have high diversification opportunities by combining both conventional and Islamic indexes in their portfolios in the long run.

Impact of monetary policy on financial stability in good times

This study examines the impact of monetary policy on financial stability in good years. It focuses on the impact of three monetary policy tools on financial stability. The study used the median quantile regression method to analyze 22 countries during the 2011 to 2018 period – a period which isolates the shock from the coronavirus disease 2019 (COVID-19) pandemic and the shock from the global financial crisis. The financial stability indicator is the country-level bank nonperforming loans ratio. The monetary policy indicators are broad money growth, broad money-to-GDP ratio and the central bank interest rate, while controlling for the inflation rate, total unemployment rate, efficiency ratio, institutional governance quality and economic growth rate. The findings reveal that high central bank interest rates impair financial stability by increasing the bank nonperforming loans ratio in African countries and developing countries. In contrast, high central bank interest rates improve financial stability in developed countries and emerging market countries. Furthermore, higher broad money growth improves financial stability in European banks, while broad money growth, broad money-to-GDP ratio and central bank interest rate do not have a significant effect on the NPL ratio of Asian banks.

The Impact of Financial Crises on the Financing Capabilities of Small and Medium-Sized Listed Companies: A Bibliometric Analysis

The global financial crisis from 2007 to 2008 had a serious economic impact on many countries and companies around the world, leading to a national economic recession. Small and medium-sized enterprises (SMEs) occupy an important position in the capital market and play a huge role in providing social employment and technological innovation. However, the occurrence of the financial crisis has caused the market to become extremely unstable, leading to financial institutions and banks tightening lending and increasing investors' aversion to the stock market. Often these listed companies find it more difficult to raise funds and their financing costs rise. This paper aims to study the impact of the financial crisis on the financing of small and medium-sized companies, and adopts a bibliometric research method. Through bibliometric analysis of 350 academic studies collected from Web of Science, it can be concluded that the region with the greatest impact on SMEs financing during the financial crisis was Asia. And the most serious impact on financing capabilities occurred in 2011. Literature analysis found that scholars in previous studies paid great attention to the financing and operation of SMEs, and thus studied and formulated policies to macro-control the economy.

Социологическая дискуссия о темпоральности финансов

This paper presents an analytical review of the theoretical tenets within the European economic sociology dis-course on the temporality of finance, spanning the period of 2010–2024. Driven by the aftermath of the 2008 global financial crisis, this topic remains a pertinent area of inquiry. The core of the discussion consists of three approaches. According to the first approach, the temporality of finance is determined by its orientation towards the future. At the same time, the future is marked by categories of uncertainty and risks. The future appears as an investment forecast, as an iterative formation and revision of the subjective expectations of financial market participants regarding the price level and the level of risk acceptance. The second approach conceptualizes the temporality of finance as anchored in the present, effectively excluding future contingencies. This perspective emphasizes the synchronicity of financial transactions and arbitrage procedures, wherein speculative value is generated in real-time based on price differentials for the same asset across disparate geographical markets or within the same market at different points in time. The third approach posits the temporality of finance as a multidirectional, non-linear, and recursive process, capable of being conceptualized through various future scenarios. This approach leverages the mechanism of future discounting, which, in contrast to its traditional financial mathematical interpretation, is construed by economic sociologists as a political technology. Discount-ing, understood in this broader sense (rather than as the application of computational formulas for determining the capital required to achieve a projected future cash flow at a specified rate of return), reflects the equilibrium of interests held by those possessing significant capital within society. It connects the present and the future, determining the present value of capital based on its anticipated future income. The author comes to the con-clusion that academic research conducted by European economic sociologists on the temporality of finance served not only to elucidate the specific mechanisms of surplus value creation in the financial economy but also to legitimize short-term financial speculation as a normative foundation for the global system of financial capitalism. This has enabled a concentrated focus on the temporality of the future, seeking out liquid targets for capital deployment and utilizing investments to shape the “future” of societies.

Analyzing Financial Risk and Financial Performance of Six Insurance Companies in Kenya: An Econometric Case Study

The scientific knowledge of the determinants of insurers’ distress has further been reinvigorated by the 2017/2019 global economic and financial crises. However, there are also a number of market risks facing the industry resulting into financial performance, if left unchecked can lead to insurance failure. Thus to enhance industry stability, it is important for firms to take mitigation. The purpose of this research was to examine the financial risks on financial performance of the insurance companies in Kenya. The overall financial risk of the insurance companies is the independent variable and was determined using the Consumer price Index, Standard deviation on foreign exchange on USD and Interest Coverage Ratio. Quantitative models were adopted because the study used secondary data which was collected from financial statements as per the audits from the selected institution. The study targeted six listed insurance in Kenya which is sufficient for generalizing. The recorded data was then analyzed using SPSS version 20.0. Regression analysis was used to find the effect of financial risk on financial performance. The period under study was from 2014 to 2024. The study found out that all the independent variables operation risk, credit risk, market risk and legal risk are positively related to financial performance of insurance companies in listed in Nairobi security exchange meaning high risks contribute to low performance of most insurance companies in Nairobi security exchange. The study recommended appropriate mitigation of risks for the betterment of insurance of companies in Kenya.

Japan's Economic Recovery under the Financial Crisis -- Compared with the United States

From 2008 to 2009, the United States ushered in the subprime mortgage crisis, which caused, including but not limited to, the break of bank capital chain, the rise of interest rates, the decline of people's consumption and investment ability, the collapse of the real economy, the closure of many factories, layoffs, and the straight rise of unemployment, which was a global financial crisis. At the same time, Japan is also experiencing a huge economic recession after the bursting of the economic bubble and the recovery of the economy. The subprime mortgage crisis is undoubtedly a shock to the precarious Japan. This paper will collect multiple sets of data, GDP, unemployment rate, house price and so on. It will analyze the similarities and differences between Japan's "bubble economy" and the United States' "subprime crisis" in terms of monetary supply and fiscal policies adopted by Japan in the face of various difficulties.