Macroeconomic Crisis Research Articles

How did house and stock prices respond to different crisis episodes since the 1870s?

This paper analyses the effects of different types of macroeconomic downturns on house and stock prices. While pre-crisis asset price bubbles are identified as major signals for macroeconomic fragility, recent literature document that house and stock prices are interlinked during recovery periods. To delve deeper into this post-crisis asset price behaviours, we project house and stock price paths following three different macroeconomic crises, normal recessions, financial recessions, and disasters, using historical macro-financial dataset since the 1870s for 17 western economies. We find that financial recessions have the most detrimental effect on house and stock prices followed by severe disasters like war and extreme weather. The results also reveal that stock prices drop substantially immediately after financial crisis and rebound within six years, while impacts to house prices are more persistent. The differences in magnitude and persistence of these effects can be attributed to the nature of crisis and asset class.

Government Support and Institutions’ Intermediation throughout Companies’ Adaptation to the COVID-19 Crisis

The current health and economic crisis is an unprecedented event in the recent history of humanity. Given the lack of treatment and the rapid spread of the virus, several countries and/or local governments had to adopt measures of social distancing and movement restriction. The scenario set by the pandemic, therefore, brought up the need for quick adaptation and innovation, so companies could avoid liquidity and bankruptcy issues. Additionally, as a means to prevent firms’ problems from generating a major macro-economic crisis, governments had to offer a range of support programs as ways to sustain employment and income. Given the dire need to find new ways to conduct businesses, this article sought to understand whether or not government support is a key factor for organizations to adjust or convert—totally or partially—their products or services. The applied methodology was logistic regression, and to solve eventual endogeneity problems, we applied the bivariate Probit model. More than 11,000 observations were included in the main model. The results showed that government support was an important element for companies to adapt their products and services during the first wave of COVID-19. Therefore, companies in countries with stronger institutional environments performed better than those in weaker settings.

Directions of bioeconomy development in the perspective of postwar recovery of Ukraine

The problems of food shortages through population growth, depletion of minerals, raw materials, mineral and energy resources, climate change, environmental pollution, etc. are solved by the bioeconomy, the narrative of which is the use of natural resources on a renewable basis in achieving sustainable development goals. Ukraine has significant knowledge, agro-industrial, forest, land and water potential for the introduction of biotechnology and sustainable bioeconomy, which includesthe production, exploitation and use of biological resources, processes and systems to provide products, processes and services across all economic sectors. The purpose of the article is to determine the directions of bioeconomy development taking into account the global and macroeconomic crisis caused by military actions on the territory of Ukraine. The research methodology involves the use of general scientific and specific methods used in economics, ecology and biotechnology, and is based on an interdisciplinary approach. The scientific novelty of the obtained results is to determine the directions of development of Ukrainian bioeconomy based on the use of biotechnology in food, agricultural, medical, pharmaceutical, industrial, environmental sphere, green energy, water management and forestry. Conclusions. The study found that Ukraine can create a sustainable, innovative, resource-efficient economy integrated into the world, which combines food security with the sustainable use of renewable energy sources and resources for industry. Biomass can replace fossil fuel products, and residues and waste, agricultural and forestry raw materials can be used to ensure environmentally friendly production. In the post-war period, the bioeconomy should be a priority to support Ukrainian economic recovery, as a sustainable bioeconomy returns resources to the real sector, creates jobs, promotes environmental production and consumption, and makes optimal use of limited resources on a circular basis. Keywords: bioeconomy, sustainable bioeconomy, biotechnology, biomass, postwar economic recovery

An Islamic critique of rival economic systems’ theories of interest

PurposeThis paper aims to contribute an Islamic critique of various competing economic system’s theories of interest, which have evolved within the distinct ideological frameworks of distinct rival economic systems and religions from the point of view of discovering potential effective Islamic economic solutions of the interest-driven modern economic, financial and banking and debt crises and the related problems of inflation, extreme, wealth inequalities and extreme poverty.Design/methodology/approachThis historical research paper portrays the chronological evolution of competing narratives and theories of interest in realms of religions, philosophies and rival economic systems for contributing their comparative review and critique from an Islamic point of view in light of the pertinent literature of multidisciplinary history of religions, philosophies and economic thought. It develops an Islamic critique of theories of interest in light of interactions among history of religious thought on interest, history of economic thought on interest and economic theories of interest and the interest-driven economic crises for highlighting potential Islamic interest-free solutions of the modern economic crises in the framework of the Islamic political economy. In light of an Islamic critique of various competing theories of interest, the paper presents pertinent economic policy recommendations for the governments of the countries of the contemporary Muslim world.FindingsThe interest-free Islamic economic, as well as banking theories and models, offer the potential practical exploitation-free and injustice-free humanitarian solutions of the contemporary persisting macroeconomic crises (national, regional and global economic crises, financial crises, debt crises and banking crisis). Current Islamic discourses on interest and interest-free Islamic banking have effectively promoted the popularity and growth of global Islamic banking industry in the Muslim world in the 21st century.Practical implicationsKeeping in view a general universal consensus of the Islamic jurists on the elimination of interest of all types from the economy, it is recommended for the Governments of the Muslim countries to implement a consensus-based Islamic banking model, which uses only the Islamic juristic consensus-based Islamic modes of banking and finance – Musharikah, Mudharabah and Al-Qardh Al-Hassan (interest-free loan) – for precluding the possibilities of emergence of controversies about the prospective Riba-free Islamic economic and banking system. Litmus test of the practical success of the interest-free Islamic universal economic and banking system is the successful elimination of all forms of Riba (interest) and all possibilities of its involvement in extractive and exploitative activities in letter and spirit.Originality/valueThis research paper contributes a comprehensive logical and objective critique of various competing prominent theories of interest from an Islamic economic point of view and highlights their pertinent practical macroeconomic problems-cum-consequences as well as the potential Islamic macroeconomic policy responses in the form of interest-free Islamic banking/monetary/fiscal policies.

Provision of Public Health and Covid-19: A Case of Responsibility Evasion in India

This study will analyse the overtime public spending in public health (1990-2020) and will also try to highlight how covid-19 pandemic can be a reminder to the government of its public health responsibilities it has been partially evading for too long. Covid-19 pandemic has led to emergence of macroeconomic crises inflated by public health crises. The public policy response to the pandemic has been to choose between twin alternatives of “Livelihood saving versus Life-saving”. A closer examination of the two crises reveals that the Livelihood crises to a large extent was magnified by lifesaving policies in emerging economies like India. Due to weak public health infrastructure these economies were forced to undergo abrupt and harsh lockdowns. In face of inadequate health infrastructure, the lockdowns were the only strategy left with the government-leading to classic supply side shock to macroeconomic aggregates. The inadequacy of health infrastructure can be primarily associated to a consistent tendency on the part of Indian government to evade its public health responsibilities. As of 2018-19 government has allocated 1.9 percent of its national income to health sector as against the standard norm of 3 percent. Apart from “good for growth argument” investment in health care is an important welfare target and a pre-condition to sustained economic growth. Apart from absolute inadequacy, the study found an asymmetric distribution of health infrastructure in the country.

The reinvestment by multinationals as a capital flow: Crises, imbalances, and the cash-based current account

When the affiliate of a foreign corporation saves a dollar of its profits, the host country records it as an inflow of retained earnings foreign direct investment (REFDI). If invested, this dollar arithmetically generates a current account deficit, even though cash does not cross borders. This study explores the empirical macroeconomic of REFDI, which globally comprises half of FDI inflows. Using international capital flows (1980–2018), we show that REFDI behaves like national saving in its procyclicality. Unpacking FDI in the analysis also makes a difference for the investment cycle. Moreover, we decompose the long run saving-to-investment correlation, finding a role for REFDI in the Feldstein-Horioka puzzle. Adjusting the current account for REFDI matters since REFDI lowers the probability of macroeconomic crises and sudden stops. Overall, REFDI is stronger in countries receiving more FDI and it was also strong during the recent commodity boom. We are not challenging that the balance of payments works on nationality and accrual bases. However, our results suggest that the external balance assessment of countries should adjust for REFDI because it tends to have a different propensity to be invested and to build-up vulnerabilities.

Are IMF rescue packages effective? A synthetic control analysis of macroeconomic crises

Whether, and to what degree, IMF lending succeeds in stabilizing economies remains an open question. Here, a synthetic control analysis of macroeconomic crises with IMF intervention is performed—leveraging the existence of similar crises without intervention—that finds positive recovery effects. In the first five years following a crisis, output differences are, on average, nearly two percent of GDP per year. Consistent with a liquidity channel, effects are hump-shaped and fade in the medium run. An analysis of historical IMF forecasts provides evidence against selection as a spurious driver of this result, suggesting that these positive estimates are indeed causal.

Макроекономічний аналіз ефективності регулювання економіки України: ретроспектива та сучасний фінансово-економічний стан

With the beginning of Russia’s large-scale war against Ukraine on February 24, 2022, Ukraine’s economy suffered shock influences, which on the part of the main public administration bodies caused an urgent need to respond promptly to the sharp changes and dynamics of events that have since unfolded. In addition, it was necessary to understand why and for what reasons the financial-economic system of Ukraine reacted in the way it behaved. Thus, the presented study is aimed at defining and assessing the effectiveness of the implementation of the previous systemic policy along with analyzing the operational actions of the National Bank of Ukraine as the main financial-economic regulator in the conditions of belligerency with regard to the country’s economy. Such an analysis provides an opportunity to further adjust the tactics of managing the financial-economic processes, taking into account the identified shortcomings in the implementation of decisions of previous periods. The research uses a comprehensive approach to macroeconomic analysis, methods of structural analysis and analysis of the dynamics of financial-economic indicators in retrospection. The research is built in two stages. At the first stage, with the help of retrospective financial-economic analysis methods, an assessment of the efficiency of the implementation of the defined Strategy for the development of financial markets in Ukraine for the period from 2016 to 2021 was carried out. At the second stage of the research, the actions of the Central bank were recorded, which led to the stabilization of the macroeconomic crisis in the country, the main directions of operational regulation during martial law in Ukraine were determined, their efficiency was assessed. A retrospective analysis of the actions of the National Bank of Ukraine in 2016-2022 showed that during this period the following important results were achieved in ensuring both financial and price stability, also the stability of the monetary unit: the monetary regime was used quite successfully in conducting inflation targeting, the standards of commercial banks were increased, a program for the accumulation of international reserves was carried out, and the exchange rate was regulated in order to ensure its growing. The assessment of the actions of the National Bank of Ukraine during the period of martial law after February 24, 2022 showed that the following measures of operational regulation were carried out: a number of external and internal incoming and outgoing financial barriers were applied, the accounting rate was regulated, special measures were constantly taken to ensure the financial-economic reserves of the financial system of Ukraine, new mechanisms of financial levers for the credit situation were developed. Further on, it would be advisable to consider the efficiency of regulating the financial-economic situation in a more distant period in order to be able to assess the correctness and fallacy of the decisions taken and adjust the regulator’s actions to maintain a stable state of the economy and further gradually exit from the crisis status. This analysis allows society to apprehend the complexity, consistency of actions of the central economic regulatory bodies, to understand the consequences and expediency of such actions. The presented research is original and comprehensive, touching on all macroeconomic aspects of the activities of the main financial regulator of Ukraine, its influence on the financial-economic situation of the country.

A fresh look at the concepts of economic and macroeconomic crises: General, priority, and institutional approach

Subject. The article addresses approaches to understanding the economic and macroeconomic crisis. Objectives. The aim is to study and update the concepts of macroeconomic crisis and economic crisis, taking into account modern crisis phenomena and processes, for easier identification and timely anti-crisis measures. Methods. The study draws on the abstract-logical method. Results. The paper clarifies the terms "macroeconomic crisis" and "economic crisis", adds two approaches to the traditional general economic approach to understanding macroeconomic and economic crises, i.e. priority-economic (new approach) and institutional- economic (updated approach). I offer a new systemic grouping of signs of macroeconomic crises and examples that reveal the impact of new signs of these crises on macroeconomics. I formulated a new idea of the unity of intermittent and persistent crisis. Conclusions. The priority-economic approach indicates the priority areas of effort mobilization in the process of crisis management of macroeconomics. The institutional-economic approach broadens the perception of the crises and confirms the need to apply an updated institutional approach to all phenomena and processes studied in macroeconomics.

The Lasting Well‐Being Effects of Early Adulthood Macroeconomic Crises

This paper studies the effects of macroeconomic crises experienced in early adulthood on subjective well‐being (SWB) later in life. Using repeated cross‐sectional survey data of over 100,000 individuals from 38 countries around the world combined with historical data on macroeconomic circumstances, I find that having experienced a macroeconomic crisis at ages 18–25 is detrimental to SWB. This result is in line with earlier literature that focuses on other individual‐level outcomes. However, the analysis presented in this paper reveals that outcomes related to individual’s earnings, employment status, family life, and religion cannot fully explain the lasting effect of macroeconomic crises on well‐being. Results on heterogeneous responses show that the negative effect is largest for females and for individuals with low educational attainment.

Economic stress among couples with emerging adult children in Portugal.

Macroeconomic crises occur cyclically, entailing devastating social consequences for individuals and families. Previous research addressing families' responses to socioeconomic upheavals has been mainly conducted with couples with young or adolescent children. Less research attention has been given to middle-aged couples with emerging adult children who might be struggling to support their offspring's transition to adulthood emotionally and financially. The present study examines the impact of economic stressors on family and individual functioning reported by couples with emerging adult children in Portugal. Using a sample of 317 heterosexual middle-aged couples, structural equation models were built to assess the links between economic hardship, economic pressure, and family functioning and psychological well-being. Following an actor-partner interdependence model (APIM) approach, both actor and partner effects were tested. The results showed that greater economic hardship was indirectly linked with (a) poor family functioning as reported by men and women, via the economic pressure felt by men, revealing an actor and a partner effect and (b) poor psychological well-being via each partner's own feeling of economic pressure, revealing only actor effects. Findings also indicated that economic stress processes may operate differently across socioeconomic status (SES) groups, with men from low/medium-low SES reporting a more pronounced association between economic pressure and family functioning. This study added support to previous literature on the adverse impact of economic stressors on family and individual functioning, extending family economic stress research to the Portuguese cultural setting and to an understudied stage of the family life cycle. (PsycInfo Database Record (c) 2021 APA, all rights reserved).

The Long Run Impact of a Macroeconomic Crisis on Schooling Outcomes

The effect of an aggregate economic shock on human capital formation is theoretically ambiguous. When real wages fall during a recession, households face both a drop in their real incomes, as well as lower wages in available jobs. The impacts, particularly in the long run, on educational attainment and labour market outcomes is uncertain. I exploit the heterogeneous impact of an economic recession as measured by the variation in rice price increases to find that, for net consumers of rice, higher rice price increases are associated with small declines in school participation for younger children, who have limited labour market opportunities, and large declines in employment for older children, who face higher opportunity costs of schooling. The results are reversed for net producers of rice. The fall in wages protects older children from suffering adverse long-run consequences to their educational attainment. However, children who face higher wages during critical junctures in their schooling are more likely to start working and face reductions in human capital investments. These differences in investments have significant long-term effects on later-life income, employment status and sector of employment.

Effects of the Great Recession on Educational Disparities in Cardiometabolic Health.

Macroeconomic crises can exaggerate existing educational disparities in health. Few studies, however, have examined whether macroeconomic crises get under the skin to affect educational disparities in health-related biological processes. This study aimed to examine the effect of the economic recession of 2008 (i.e., Great Recession) on educational disparities in cardiometabolic risk and self-reported psychological distress. Data were drawn from two subsamples of the Midlife in the United States (MIDUS) study: the second wave of the MIDUS sample (pre-recession cohort, N = 985) and the refresher sample (post-recession cohort, N = 863). Educational attainment was categorized into high school education or less, some college, and bachelor's degree or higher. Outcomes included metabolic syndrome, C-reactive protein, and interleukin-6, as well as self-reported perceived stress, depressive symptoms, and financial distress. Results showed that having a bachelor's degree or higher (compared to having a high school education or less) was more strongly associated with decreased metabolic syndrome symptoms in the post-recession cohort than the pre-recession cohort, above and beyond demographic, health, and behavioral covariates. These findings did not extend to systemic inflammation or psychological distress. Our findings suggest that chronic macroeconomic stressors may widen the educational gap in physical health, particularly cardiometabolic health, by modifying biological and anthropometric risk factors implicated in metabolic syndrome.

Impact of COVID 19 on Indian Migrant Workers: Decoding Twitter Data by Text Mining.

The Coronavirus pandemic has induced a huge economic crisis. The norms of social distancing and consequent lockdown to flatten the curve of this infection has brought economic activity across the globe to a standstill. A mass exodus of workers from major urban centres of India to their native villages started. Mental, financial and emotional agony inflicted due to job-loss, lack of job and livelihood opportunities led to this. A massive macroeconomic crisis for the country with serious ramifications has consequently exploded. The present study explores and captures the diffusion and discovery of information about the various facets of reverse migration in India using Twitter mining. Tweets provide extensive opportunities to extract social perceptions and insights relevant to migration of workers. The massive Twitter data were analysed by applying text mining technique and sentiment analysis. The results of the analysis highlight five major themes. The sentiment analysis confirms the confidence and trust in the minds of masses about tiding through this crisis with government support. The study brings out the major macroeconomic ramifications of this reverse migration. The study’s findings indicate that a concentrated joint intervention by the State and Central Governments is critical for successfully tiding through this crisis and restoring normalcy. The subsequent policy measures announced by the government are being critically gauged. In addition, the authors have proposed measures to ameliorate this damage on the formal and informal sectors.

The Economy Between Pandemics

This article analyzes the economic and social impact of the pandemic in Argentina. It begins with the macroeconomic crisis that the new government had to face in December 2019 and the degrees of freedom available to be able to carry out compensatory fiscal and monetary policies to alleviate the effects of the pandemic. The article also analyzes the impact of these compensatory measures, their limits and results. In particular, it reviews the global impact of the pandemic, the different types of response at the international level and the asymmetry of the global recovery, in addition to evaluating different scenarios and their impact in Argentina and other developing countries. Finally, it also studies the temporary and permanent changes that the pandemic causes at the global level and suggests policy alternatives to avoid external restriction to face the crisis. It does so by laying the foundations for equitable development on the philosophical basis of Latin American structuralism and progressive thought, all within a new paradigmatic framework.

ОЦІНКА ІНВЕСТИЦІЙНОЇ ПРИВАБЛИВОСТІ БАНКІВСЬКОГО СЕКТОРУ США ДЛЯ МІНОРИТАРНИХ ІНВЕСТОРІВ: ТЕОРЕТИКО-ПРИКЛАДНИЙ АСПЕКТ

Анотація. Метою роботи є доведення доцільності для міноритарних інвесторів інвестицій в акції банків США тільки зі спекулятивними, а не інвестиційними намірами; виявлення причин недоцільності довгострокового інвестування в сектор за наявності фундаментальних сприятливих умов його розвитку. Банківський сектор США розглянуто як об’єкт довгострокового інвестування для інвесторів, що планують бути лише міноритарними акціонерами, у тому числі й для громадян України. Основними методами дослідження обрано графічний аналіз динаміки цін акцій ключових банків США і визначення середньорічного темпу зростання ринкової вартості їхніх акцій. Такий середньорічний темп росту вартості акцій відповідних банків порівнювався з динамікою фондового індексу S&P-500. Сектор характеризується сприятливими умовами розвитку, однак доведено доцільність для міноритарних інвесторів інвестицій в акції банків США тільки зі спекулятивними, а не інвестиційними намірами. Уточнено чинники недоцільності довгострокового інвестування у цей сектор за наявності фундаментальних сприятливих умов розвитку сектору в країні. Визначено, що спекулятивний характер інвестицій у банківський сектор США зумовлений відсутністю сталого довгострокового зростання акцій відповідних банків темпами, що перевищують темпи росту фондового індексу S&P-500. Уточнено основні причини, що гальмують сталий розвиток банківського сектору США і не дозволяють інвестиціям у цей сектор випереджати за ефективністю інвестиції в широкий ринок. Основними такими чинниками є суттєвий вплив на банківську діяльність як макроекономічних криз, так і криз за окремими секторами господарства, що є клієнтами банків. Оскільки клієнтами банків, як кредитори, є майже всі сектори господарства, то перелік можливих секторальних криз, які проєктуються на банківську систему пропорційно до обсягів кредитування, є досить суттєвим. Це робить інвестиції в банківський сектор більш ризиковими в порівнянні з інвестиціями в інші сектори економіки. Конкретизовано властивість банківського сектору США і його державного регулювання еволюціонувати в напрямі вдосконалення можливостей протидії економічним кризам. Така властивість зменшує достовірність прогнозів розвитку досліджуваного сектора аналогічно динаміці попередніх періодів і змушує планувати події за більш оптимістичним сценарієм. Визначено неоднорідність банківського сектору США за структурою активів і рівнем диверсифікації видів діяльності, що дозволяє різним чином окремим банкам країни проходити періоди економічних криз. Ключові слова: банківський сектор США, акції, фондовий індекс S&P-500, інвестиції, економічні кризи. Формул: 2; рис.: 0; табл.: 2; бібл.: 21.

The economic cost of conflict: Evidence from South Sudan

AbstractThis study estimates the output loss in South Sudan as a result of the double shock of the protracted post‐independence conflict and macroeconomic crisis. Using the synthetic control method for comparative studies, the analysis suggests that the cumulative loss in the growth rate of real per‐capita gross domestic product (GDP) was 69.63% (or a yearly average of 15.65%) over the period 2012–2018. This resulted in an accumulated loss in the real per‐capita GDP of US$7,070 (yearly average of US$1,010) and an accumulated loss in the aggregate GDP of US$81.1 billion (yearly average of US$11.6 billion) over the same period. Consequently, South Sudan's real per‐capita GDP in 2018 was just a third of what it would have been in the absence of conflict. Moreover, we find that exports and investment were the main channels through which the economy was adversely impacted by the conflict. These results are robust to several placebo and robustness tests. Implications for future research are discussed.

Does regulation induce cost efficiency in electricity distribution utilities? Use of stochastic cost frontier analysis for the Indian states

To overcome the macroeconomic crisis of the early 1990s, the Government of India persuaded the state governments to adopt market-oriented reforms for loss-making state public sector undertakings in general and power sector utilities in particular with an aim to limit the overall size of the public sector. This led the state governments to undertake unbundling of their vertically integrated State Electricity Boards (SEBs), establish independent regulatory bodies in the form of State Electricity Regulatory Commissions (SERCs) to regulate the power sector, and allow for an active participation of private sector. Given this backdrop, the present study attempts to examine the effect of establishment of SERCs on the cost-efficiency of electricity distribution in the Indian states. Thereby, it evaluates whether the establishment of SERCs has induced efficiency gains in the electricity distribution. Estimating a Cobb-Douglas stochastic cost frontier function, it finds that the establishment of independent regulators in various states has resulted in significant improvements in the cost-efficiency in the electricity distribution.

Prospects for the Development of the International Cagliari Elmas Airport (Sardinia, Italy) in the Context of a Macroeconomic Crisis

Prospects for the Development of the International Cagliari Elmas Airport (Sardinia, Italy) in the Context of a Macroeconomic Crisis

Preliminary lessons from COVID-19 disruptions of small-scale fishery supply chains.

The ongoing COVID-19 pandemic and associated mitigation measures have disrupted global systems that support the health, food and nutrition security, and livelihoods of billions of people. These disruptions have likewise affected the small-scale fishery (SSF) sector, disrupting SSF supply chains and exposing weaknesses in the global seafood distribution system. To inform future development of adaptive capacity and resilience in the sector, it is important to understand how supply chain actors are responding in the face of a macroeconomic shock. Comparing across seven SSF case studies in four countries, we explore how actors are responding to COVID-19 disruptions, identify constraints to adaptive responses, and describe patterns of disruption and response across cases. In all cases examined, actors shifted focus to local and regional distribution channels and particularly drew on flexibility, organization, and learning to re-purpose pre-existing networks and use technology to their advantage. Key constraints to reaching domestic consumers included domestic restrictions on movement and labor, reduced spending power amongst domestic consumers, and lack of existing distribution channels. In addition, the lack of recognition of SSFs as essential food-producers and inequities in access to technology hampered efforts to continue local seafood supply. We suggest that the initial impacts from COVID-19 highlight the risks in of over-reliance on global trade networks. The SSFs that were able to change strategies most successfully had local organizations and connections in place that they leveraged in innovative ways. As such, supporting local and domestic networks and flexible organizations within the supply chain may help build resilience in the face of future macroeconomic shocks. Importantly, bolstering financial wellbeing and security within the domestic market both before and during such large-scale disruptions is crucial for supporting ongoing supply chain operations and continued food provision during macroeconomic crises.