Financial crises Lessons from the last 120 years

The crisis problem is one of the dominant macroeconomic features of our age. Its prominence suggests questions like the following: Are crises growing more frequent? Are they becoming more disruptive? Are economies taking longer to recover? These are fundamentally historical questions, which can be answered only by comparing the present with the past. To this end, this paper develops and analyses a data base spanning 120 years of financial history. We find that crisis frequency since 1973 has been double that of the Bretton Woods and classical gold standard periods and is rivalled only by the crisis‐ridden 1920s and 1930s. History thus confirms that there is something different and disturbing about our age. However, there is little evidence that crises have grown longer or output losses have become larger. Crises may have grown more frequent, in other words, but they have not obviously grown more severe. Our explanation for the growing frequency and chronic costs of crises focuses on the combination of capital mobility and the financial safety net, including the implicit insurance against exchange risk provided by an ex ante credible policy of pegging the exchange rate, which encourages banks and corporations to accumulate excessive foreign currency exposures. We also provide policy recommendations for restoring stability and growth.

— Michael Bordo, Barry Eichengreen, Daniela Klingebiel and Maria Soledad Martinez‐Peria

/pdf/is-the-crisis-problem-growing-more-severe-52qyneo06w.pdf

Is the crisis problem growing more severe

As robots and other computer-assisted technologies take over tasks previously performed by labor, there is increasing concern about the future of jobs and wages. We analyze the effect of the increase in industrial robot usage between 1990 and 2007 on US local labor markets. Using a model in which robots compete against human labor in the production of different tasks, we show that robots may reduce employment and wages, and that the local labor market effects of robots can be estimated by regressing the change in employment and wages on the exposure to robots in each local labor marketâ€”defined from the national penetration of robots into each industry and the local distribution of employment across industries. Using this approach, we estimate large and robust negative effects of robots on employment and wages across commuting zones. We bolster this evidence by showing that the commuting zones most exposed to robots in the post-1990 era do not exhibit any differential trends before 1990. The impact of robots is distinct from the impact of imports from China and Mexico, the decline of routine jobs, offshoring, other types of IT capital, and the total capital stock (in fact, exposure to robots is only weakly correlated with these other variables). According to our estimates, one more robot per thousand workers reduces the employment to population ratio by about 0.18-0.34 percentage points and wages by 0.25-0.5 percent.

Robots and Jobs: Evidence from US Labor Markets

A key precursor of twentieth-century financial crises in emerging and advanced economies alike was the rapid buildup of leverage Those emerging economies that avoided leverage booms during the 2000s also were most likely to avoid the worst effects of the twenty-first century’s first global crisis A discrete-choice panel analysis using 1973-2010 data suggests that domestic credit expansion and real currency appreciation have been the most robust and significant predictors of financial crises, regardless of whether a country is emerging or advanced For emerging economies, however, higher foreign exchange reserves predict a sharply reduced probability of a subsequent crisis

Stories of the Twentieth Century for the Twenty-First

There is no surefire one-size-fits-all way to deal with the impact of potentially destabilizing short-term capital inflows. From an individual-country point of view, the usual elements of the toolkit to manage inflows include currency appreciation, reserves accumulation, adjustments in fiscal and monetary policy, and strengthening the prudential framework. In some circumstances, however, the usual macro policy remedies will not be appropriate so the construction of new regulation mechanisms of capital flow is needed.

https://ecsocman.hse.ru/data/2012/11/28/1251386834/9.pdf

Capital Inflows: The Role of Controls

This article evaluates the job quality of work in the remote gig economy. Such work consists of the remote provision of a wide variety of digital services mediated by online labour platforms. Focusing on workers in Southeast Asia and Sub-Saharan Africa, the article draws on semi-structured interviews in six countries (N = 107) and a cross-regional survey (N = 679) to detail the manner in which remote gig work is shaped by platform-based algorithmic control. Despite varying country contexts and types of work, we show that algorithmic control is central to the operation of online labour platforms. Algorithmic management techniques tend to offer workers high levels of flexibility, autonomy, task variety and complexity. However, these mechanisms of control can also result in low pay, social isolation, working unsocial and irregular hours, overwork, sleep deprivation and exhaustion.

/pdf/good-gig-bad-gig-autonomy-and-algorithmic-control-in-the-3v2ih5tuvy.pdf

Good Gig, Bad Gig: Autonomy and Algorithmic Control in the Global Gig Economy:

Digital technologies have spread rapidly in much of the world. Digital dividends—that is, the broader development benefits from using these technologies—have lagged behind. In many instances, digital technologies have boosted growth, expanded opportunities, and improved service delivery. Yet their aggregate impact has fallen short and is unevenly distributed. For digital technologies to benefit everyone everywhere requires closing the remaining digital divide, especially in internet access. But greater digital adoption will not be enough. To get the most out of the digital revolution, countries also need to work on the “analog complements”—by strengthening regulations that ensure competition among businesses, by adapting workers’ skills to the demands of the new economy, and by ensuring that institutions are accountable. Digital technologies—the internet, mobile phones, and all the other tools to collect, store, analyze, and share information digitally—have spread quickly. More households in developing countries own a mobile phone than have access to electricity or clean water, and nearly 70 percent of the bottom fifth of the population in developing countries own a mobile phone. The number of internet users has more than tripled in a decade—from 1 billion in 2005 to an estimated 3.2 billion at the end of 2015. This means that businesses, people, and governments are more connected than ever before. The digital revolution has brought immediate private benefi ts—easier communication and information, greater convenience, free digital products, and new forms of leisure. It has also created a profound sense of social connectedness and global community. But have massive investments in information and communication technologies (ICTs) generated faster growth, more jobs, and better services? Indeed, are countries reaping sizable digital dividends?

World development report 2016: Digital dividends

https://works.bepress.com/aparajita_goyal/34/download/

Will digital technologies transform agriculture in developing countries

Behavior of output during currency crises

This paper analyzes the behavior of output during currency crises using a sample of 195 crisis episodes in 91 developing countries during 1970-98. It finds that more than two-fifths of the crises in the sample were expansionary, and that output contraction was greater in large and more developed economies than in small and less developed economies. Currency crises have not been any more contractionary in the 1990s than in the previous two decades. Countries that traded less with the rest of the world, that had a relatively open capital account, and where crises were preceded by large capital inflows were more likely to be associated with contraction during crises. The contraction was more pronounced if trade competitors devalued, oil prices rose during the crisis, and postcrisis period was marked by tight monetary policy and expansionary fiscal policy.

Output Response to Currency Crises

There is persuasive evidence that India has a comparative advantage in agriculture. Yet its share in global agriculture exports is miniscule and its domestic market is increasingly protected. In global trade negotiations, India's efforts have been directed less towards the elimination of all distortions at home and abroad, than towards retaining the right to protect. To develop a case and a strategy for both domestic reforms and proactive engagement in international negotiations, it is critical to understand why a large, low-cost producer of agricultural commodities needs such strong protection and has such a feeble presence in the global market. The author addresses this puzzle in the context of the horticulture sector, one of the most dynamic segments of Indian agriculture and international trade. The sector represents a 'picture of the future' and encompasses the major challenges that Indian agriculture faces in a world where food patterns are changing because of increasing incomes; delivery schedules are more demanding with the emergence of supermarkets in retail; and barriers to trade such as tariffs and subsidies are less important than the challenges posed by high sanitary and phyto-sanitary (SPS) standards. The horticulture sector also represents a miniature 'picture of agriculture' in that here too India is a large, low-cost cost producer but has a tiny share in global trade and seeks to protect its own market.

Deepak Mishra

Papers

World development report 2016: Digital dividends

Will digital technologies transform agriculture in developing countries

Behavior of output during currency crises

Output Response to Currency Crises

From competition at home to competing abroad : a case study of India's horticulture