Showing papers in "Global Policy in 2020"

Measuring the Economic Risk of COVID-19

Abstract: We measure the economic risk of COVID-19 at a geo-spatially detailed resolution. In addition to data about the current prevalence of confirmed cases, we use data from 2014–2018 and a conceptual disaster risk model to compute measures for exposure, vulnerability, and resilience of the local economy to the shock of the epidemic. Using a battery of proxies for these four concepts, we calculate the hazard, the principal components of exposure and vulnerability to it, and of the economy’s resilience (i.e. its ability of the recover rapidly from the shock). We find that the economic risk of this pandemic is particularly high in most of Sub-Saharan Africa, South Asia, and Southeast Asia. These results are consistent when comparing an ad hoc equal weighting algorithm for the four components of the index, an algorithm that assumes equal hazard for all countries, and one based on estimated weights using previous aggregated disability-adjusted life years losses associated with communicable diseases.

Defence in Depth Against Human Extinction: Prevention, Response, Resilience, and Why They All Matter

Abstract: We look at classifying extinction risks in three different ways, which affect how we can intervene to reduce risk. First, how does it start causing damage? Second, how does it reach the scale of a global catastrophe? Third, how does it reach everyone? In all of these three phases there is a defence layer that blocks most risks: First, we can prevent catastrophes from occurring. Second, we can respond to catastrophes before they reach a global scale. Third, humanity is resilient against extinction even in the face of global catastrophes. The largest probability of extinction is posed when all of these defences are weak, that is, by risks we are unlikely to prevent, unlikely to successfully respond to, and unlikely to be resilient against. We find that it's usually best to invest significantly into strengthening all three defence layers. We also suggest ways to do so tailored to the classes of risk we identify. Lastly, we discuss the importance of underlying risk factors - events or structural conditions that may weaken the defence layers even without posing a risk of immediate extinction themselves.

The Impact of Corporate Sustainability and Digitalization on International Banks’ Performance

Abstract: We analyse the implications for international banks of two contemporary megatrends: corporate sustainability (CS) and digitalization. The digital environment and the availability of massive data from customers generate asymmetric information for banks to the detriment of customers, who experience individual vulnerabilities such as privacy rights. This can hinder the positive influence of digitalization in banks’ performance, with relevant managerial and political implications. In this context, the reputation generated by CS strategies can constitute a credence factor that reduces customers’ fears of opportunistic behavior and information asymmetries. We test and find support for our hypothesis over a panel data of large international banks from developed countries. Our findings shed light on the mutual reinforcement of CS and digitalization strategies in enhancing banks’ market performance and efficiency.

IMF‐World Bank Cooperation Before and After the Global Financial Crisis

Abstract: This article adopts a diachronic view to compare patterns of institutional evolution of cooperation between the International Monetary Fund (IMF or Fund) and the World Bank (or Bank) before and after the global financial crisis. While the rules for Fund‐Bank cooperation had typically been tightened in response to crisis episodes, on balance they were loosened in the wake of the global financial crisis. Building on over 90 semi‐structured expert interviews and relevant official documentation, I argue that this new trend was grounded in changed imaginaries of cooperation among IMF and World Bank officials. Whereas they had tended to envisage integrative futures in key areas of operational overlap before the crisis, alternative visions of more fragmented joint futures came to prevail after it. This difference manifested itself in a profound shift in official discourses about, as well as interviewee accounts of, the function of the Financial Sector Assessment Programme (FSAP) and Poverty Reduction Strategy Papers (PRSPs). The analysis foregrounds the reflexivity of relationships between international organisations (IOs), especially the ability of IO staff involved in cooperative activities to (re)construct imaginaries that can foster or foreclose inter‐organisational change.

The Adjustment of International Institutions to Global Power Shifts: A Framework for Analysis

Abstract: As powers such as China and India rise, and powers such as the US or the UK decline, international institutions such as the United Nations Security Council, the World Trade Organization and the International Monetary Fund come under pressure to adapt to new power realities. In the wake of global power shifts, both emerging and established powers may challenge the institutional status quo. Contrary to what most power transition and power shift theories assume, challengers do not always draw on power bargaining to pursue institutional adjustment. In some issue areas, they do, but in others they employ alternative strategies including strategic cooptation, rhetorical coercion and principled persuasion. In order to contribute to a better understanding of institutional adjustments to global power shifts, the introduction to this special issue theorizes these various strategies. First, we conceptualize power bargaining, strategic cooptation, rhetorical coercion and principled persuasion as distinct strategies for institutional adjustment. Second, we elaborate on the conditions under which challengers choose particular strategies. Third, we specify the conditions under which challengers are able to achieve institutional adaptation through a particular strategy. Finally, we discuss broader implications for the future of the international order and the management of global power shifts.

The effect of banks’ IT investments on the digitalization of their customers

Abstract: Banks all over the world are investing in new banking technologies at a time when bank customers are progressively going digital in several dimensions of their economic and social interactions. Together with their existing perceptions of digital services, new banking technologies may path the way to accelerate the digitalization of bank customers, thereby achieving private and social efficiency gains. This paper exploits the fact that banks’ IT investments are mostly allocated to digital technologies to examine if such investments affect the digitalization of bank customers. The results show that banks’ IT investments have a significant positive impact on the adoption of financial digitalization by customers. Banks’ IT investments also increase the likelihood that bank customers undertake their financial transactions through digital channels rather than in the physical branch. This represents a change in the relationship banking channel. These findings shed light on the impact of banks’ IT investments on end‐users and not just on bank productivity and efficiency.

Fragmentation and the Future: Investigating Architectures for International AI Governance

Abstract: One of the authors, Luke Kemp, was generally funded through the support of a grant from the Templeton World Charity Foundation, Inc.

Acknowledging Urbanization: A Survey of the Role of Cities in UN Frameworks

Abstract: Cities are playing an increasingly vital role in global sustainability. Yet there is still little systematic and international evidence on the recognition and formal role of cities in multilateral affairs. Where and how are cities acknowledged as part of global efforts? How do the United Nations frame this ‘urban’ contribution to major international processes and agendas? To offer some initial evidence‐based pointers to this set of problems, we present an analysis of explicit references to cities in major UN frameworks (n = 32) underpinning the current Agenda 2030 on sustainable development. We investigate how cities are cited to determine the role, key themes and contextual trends framing the engagement between United Nations and cities. Contra arguments for the uniqueness of the current ‘rise’ of mayors, our review demonstrates a weak rise in the recognition of cities over time in UN frameworks and shows historical continuity in this acknowledgement since the 1970s. Our review confirms that two prevailing themes determining this are those of ‘development’ and the ‘environment’ but other issues (like ‘infrastructure’ and ‘health’) are following closely behind. It also highlights acknowledgment of cities as ‘actors’ is on the rise since the 2000s and raises fundamental questions as to the status of cities internationally. We argue it becomes imperative to more systematically and strategically think of the role of cities in the UN system, but also flag that raises fundamental challenges for multilateral governance.

Global Crisis Leadership for Disease-Induced Threats: One Health and Urbanisation.

Abstract: The concept of 'One Health' (OH) has gathered momentum among the public health and animal health communities as an important global policy agenda for drawing together these disciplines to inform urban planning and health security policies. OH research, from a risk governance perspective, is generally concerned with identifying preventative programmes that can minimise the threats posed by diseases at the animal-human interface (e.g. Corona virus, Ebola, avian influenza, the Q virus, for example). This article, by drawing on examples of disease threats, discusses the multi-level challenges of establishing OH with a particular focus on urban change. It considers the risks posed by the increasing urbanisation of animal habitats and what this means for achieving OH. The article concludes by discussing why social scientists need to pay greater attention to the concept of OH.

How Corporate Governance Mechanisms of Banks Have Changed After the 2007–08 Financial Crisis

Abstract: Weak and ineffective corporate governance mechanisms in banks have been pointed out as the main factor that contributed to the 2007–08 financial crisis. The purpose of this study is to analyze empirically how the global financial crisis of 2007–08 has impacted on banks’ governance mechanisms, comparing the differences between the two most important models of corporate governance (the shareholder and stakeholder models), and if these changes are related to improvements in banks’ governance effectiveness. To carry out our analysis, we have used a sample with 46 of the largest commercial banks in the world and the period of analysis has covered from 2002 until 2015. Our findings show that Anglo-American banks following the common law system (shareholder model) maintained their high level of governance effectiveness after the financial crises. On the other hand, Continental European banks following the civil law system (stakeholder model) increased their effectiveness after the crisis changing some practices in their corporate governance mechanisms (improvements in the structure and functioning of directors’ boards, improvements in the compensation policy for banks’ executives, as well as the implementation of CSR committees) what led to a convergence of both governance systems. Policy Implications • Strong governance practices are essential to have effective bank systems that is critical to achieve and maintain a higher level of public confidence in the banking system. • The 2007–08 financial crisis has meant a convergence of governance practices between the common and civil law systems of corporate governance. • The convergence between both systems can be explained mainly by the improvement in the governance mechanisms of Continental European banks, increasing their level of governance effectiveness. • The implementation of CSR or sustainability committees in the banking sector has improved banks’ accountability and transparency. • Changes in the compensation policy for banks’ executives after the financial crisis have improved the banks’ governance effectiveness regardless the governance system. The global financial and banking crisis of 2007–08 has revealed the importance of enhancing understanding of bank governance (Gebba, 2015). Weak and ineffective corporate governance mechanisms in the banking sector can affect banks’ performance and economy as a whole (Zakaria et al., 2018) so that they were pointed out as the main factors that contributed to this crisis (Kirkpatrick, 2009; Marcinkowska, 2012). Thus, banks’ boards were blamed for what appear to be excessive pay packages that their executives received even while their firms were failing or being bailed out by the government (Adams, 2012). Hence, the implementation of strong governance practices in the sector is essential to have effective bank systems what is critical to achieve and maintain a higher level of public confidence in the banking system (BCBS, 2006; Burlaka, 2006; Gebba, 2015; Levine, 2002; Zakaria et al., 2018). While specific features of banks and their influence on the corporate governance have raised the interest of some researchers (Laeven, 2013; Levine, 2004; Macey and O’Hara, 2003), there are relatively few cross-national studies about the effectiveness of corporate governance mechanisms in the banking sector (Maxfield et al., 2018). In this way, Levine (2002) stresses the importance of broad cross-country analyses to carry out a stronger research on financial systems. Consequently, the purpose of this study is to analyze empirically how the global financial crisis of 2007–08 has impacted on banks’ governance mechanisms, comparing the differences between the two most important models of corporate governance (the shareholder and stakeholder models), and if these changes are related to improvements in banks’ governance effectiveness. To carry out this research, we have employed a dataset with 46 of the largest commercial banks © 2020 University of Durham and John Wiley & Sons, Ltd. Global Policy (2020) 11:Suppl.1 doi: 10.1111/1758-5899.12748 Global Policy Volume 11 . Supplement 1 . January 2020 52

The Role of Capital and Liquidity in Bank Lending: Are Banks Safer?

Abstract: The aim of this paper is to examine whether and to what extent bank capital requirements and liquidity standards influence the level of bank stability. Our approach is that both capital and liquidity affect lending growth, which in turn affects bank stability. We construct a panel dataset on a sample of 2,054 commercial banks from 117 developed and developing countries during the 2000–16 period. By applying a two‐stage least squares (2SLS) empirical methodology, our findings show that capital and liquidity have a negative direct impact on the level of bank stability. However, this influence is counteracted by an indirect positive effect through the increased level of credit. Our results are not homogeneous across legal and institutional environments. In particular, we provide evidence on more relevant relationships in countries with higher level of protection of creditor rights and lower restrictions on non‐traditional banking activities. Our empirical findings are robust to different specifications of the empirical model and to potential endogeneity problems.

Measuring Sustainable Development Goals (SDGs): An Inclusive Approach

Abstract: SDGs progress measurement approaches are diverse in their underlying assumptions and statistical features. They do not measure the same thing and should not be interpreted in the same way. Nonetheless, this is not obvious to the general user as all methods are often referred to as “SDG progress”. This paper aims to answer two questions: what is an appropriate method for assessing SDG progress? and how to “leave no-one behind” in measuring progress towards the SDGs?. It provides an overview of the existing approaches for assessing progress towards the SDGs and proposes an inclusive approach for measuring SDGs progress “for all”.

The Integration of Emerging Powers into Club Institutions: China and the Arctic Council

Abstract: How do emerging powers gain inclusion into club institutions, i.e. institutions with selective memberships that deliberately seek to avoid universality? We present a framework that highlights three factors: an emerging power’s ‘fit’ to the club’s logic of exclusivity, the club’s possession of goods of value to the emerging power, and the ability of the emerging power to incentivize the club to open up via different strategies. We hypothesize that, due to the selection effect of choosing to seek inclusion in a club, emerging powers will seek integration using integrative strategies such as co‐optation and persuasion. We apply the framework to analyse the case of China’s inclusion – along with several other countries – as a State Observer in the Arctic Council in 2013. While China did use largely integrative strategies, the political background to the decision to open up to new observers reveals latent features of power bargaining. Moreover, it is unclear whether observer status has been sufficient to satisfy China. The case highlights the significance of observers in international organizations as well as the importance of clubs’ logics of exclusivity to their ability to adapt to international power shifts.

Middle East and North Africa: Terrorism and Conflicts

Abstract: During 2002–2018, the Middle East and North Africa (MENA) accounted globally for 36.1 per cent of terrorist incidents, 49.3 per cent of terrorist‐induced casualties, and 21.4 per cent of conflict deaths. One focus here is to investigate how MENA's terrorist attacks and conflicts compare with those in the world's other six regions during selected periods, drawn from 1970–2018. There is a well‐defined shift of terrorism from Latin America, Europe and Central Asia to MENA, South Asia, and sub‐Saharan Africa after 1989. A second focus is to employ panel regressions to contrast the drivers of global terrorism with those of MENA terrorism. Democracy and civil conflicts are main drivers of MENA terrorism, followed by population. Regional peacekeeping can have an ameliorating effect on terrorism by limiting conflict. The Arab Spring and associated regime changes are shown to have ushered in a wave of terrorism in MENA. Policy recommendations conclude the study.

The European financial crisis and firms' cash holding policy: An analysis of the precautionary motive

Abstract: This paper analyzes the relation between the 2008 European financial crisis and firms’ cash holding policies from a precautionary motive perspective. After considering how the European financial crisis affected the cash holding policy across different period times, we focus on whether these variations come from changes in precautionary motives. We find a positive effect for the short crisis period and a negative effect for long crisis period for the full sample. We also find evidence that for financially constrained firms, the relation between cash volatility and cash holding is positive for short crisis period but turns negative for the long crisis period. Policy Implications • Banks in Europe, while preparing their corporate governance effectiveness policies, should consider that the crisis effect on cash holding decisions is not homogeneous for firms. • In their financial plans, EU policy makers and European banks need to focus on European firms’ and investors’ precaution (financial uncertainty) levels. • Regulators should consider that lower uncertainty causes to firms to do less cash holding in a crisis period. • Financial authorities and financial markets should better consider the design of policies based on financial constraints and precautionary motives. • Policy makers should design policies that optimize the efficient use of liquid resources both at the banking and firm levels The question concerning which factors affect a firm’s cash holding policy is one of the most widely discussed issues in finance literature. Cash levels are strongly related to a firm’s hedging policies, which is a key decision for firms, especially in a crisis environment. Prior research shows that firms have four motives for holding cash: a transaction motive; a tax motive; an agency motive; and a precautionary motive (Bates et al., 2009). The extant literature identifies the precautionary as one of the most important, and recent literature has continued to focus on this motive. For example, Hadlock and Pierce (2010) find that a high level of cash holdings is related to financial constraints, in that firms hold elevated levels of cash for precautionary reasons. Song and Lee (2012) show that changes in a firm’s precautionary motive, rather than changes in firm characteristics, can explain increased cash holdings. In addition, Dur an et al. (2016) discuss the role of the precautionary motive on family firms’ cash holding policies, and Duchin et al. (2017) address the precautionary motive in relation to risky assets. The precautionary motive theory for holding cash predicts that firms hoard internal funds to finance possible future investment projects in order to avoid a possible shortage of external funds and to prevent sales and investment opportunity shocks. However, crisis periods can severely affect firms’ precautionary motive. In 2008, the International Monetary Fund highlighted the magnitude of the problem in global financial markets: ‘The financial market crisis that erupted in August 2007 has developed into the largest financial shock since the Great Depression, inflicting heavy damage on markets and institutions at the core of the financial system’. This large shock to the financial markets caused huge uncertainty among market actors (Kahle and Stulz, 2013) that lasted across many years. In 2012, Europe was still coping with uncertainty problems, and the economic position of some countries, such as Greece or Ireland, was worse than it was at the beginning of the crisis (Stiglitz, 2012). Stiglitz (2012) finds that in 2012 the financial crisis continued to have negative effects on Europe’s financial © 2020 University of Durham and John Wiley & Sons, Ltd. Global Policy (2020) 11:Suppl.1 doi: 10.1111/1758-5899.12768 Global Policy Volume 11 . Supplement 1 . January 2020 84

Informal IGOs as Mediators of Power Shifts

Abstract: In an era defined by shifting distributions of power, states are not only pushing for change in formal international organizations, they are increasingly using informal intergovernmental organizations (IIGOs) to mediate change. Why and how do states use IIGOs – institutions without a treaty or secretariat – to manage global power shifts? IIGOs are useful for states on both sides of the power shift. Established powers use IIGOs for system management through ‘collaboration’ and strengthening the ‘hegemonic consensus’ to preserve their institutional privileges while adapting to changing power realities. Rising powers use IIGOs to redistribute through ‘power bargaining’ and ‘rhetorical coercion’ to strengthen their institutional roles without overly disrupting the current order. Established and rising powers also work together to use IIGOs for integrative strategies including ‘cooptation’ and ‘principled persuasion’, creating a mutually beneficial solution that accommodates both increased demands but also mounting responsibilities. IIGOs help states manage power transitions by providing flexible institutional arrangements that facilitate bargaining without freezing outcomes in permanent institutions while the power distribution evolves. We provide case vignettes of the G7 (system management) in the early phase of a power shift, BRICS (redistributive strategies) in the middle phase, and the G20 (integrative strategies) in the later phase.

US Strategies of Institutional Adaptation in the Face of Hegemonic Decline

Abstract: How do shifts in the global distribution of power affect the US’ preferences for institutionalized cooperation? This article explains why and when the power shift creates incentives for the US to move cooperation out of universal multilateral institutions, such as the WTO, and into exclusive multilateral institutions where it seeks to create a leading consensus among a select group of ‘like‐minded’ states. An agreement reached within the sub‐group imposes costs on those excluded from the deal. This increases the hegemon’s power bargaining leverage vis‐a‐vis outsiders who can join the new agreement as price‐takers. In this scenario, the hegemon’s institutional response to the challenge of rising powers is a strategy of divide and conquer; that is, strategic cooptation based on inducements followed by power bargaining based on coercion. The double move, however, puts the hegemon in the position of challenging the institutional status quo with potentially negative consequences for the original institutional order. A case study of negotiations over a new trade in services agreement (TiSA) shows this strategy of divide and conquer at work as the US tries to first achieve a deal without emerging economies, notably China, that can later be imposed on them.

Global Regulations for a Digital Economy: Between New and Old Challenges

Abstract: Digital technologies are often described as posing unique challenges for public regulators worldwide. Their fast-pace and technical nature are viewed as being incompatible with the relatively slow and territorially bounded public regulatory processes. In this paper, we argue that not all digital technologies pose the same challenges for public regulators. We more precisely maintain that the digital technologies' label can be quite misleading as it actually represents a wide variety of technical artifacts. Based on two dimensions, the level of centralization and (im)material nature, we provide a typology of digital technologies that importantly highlights how different technical artifacts affect differently local, national, regional and global distributions of power. While some empower transnational businesses, others can notably reinforce states' power. By emphasizing this, our typology contributes to ongoing discussions about the global regulation of a digital economy and helps us identify the various challenges that it might present for public regulators globally. At the same time, it allows us to reinforce previous claims that these are importantly, not all new and that they often require us to solve traditional cooperation problems.

Global Common Goods for Health: Towards a New Framework for Global Financing

Abstract: The COVID‐19 pandemic, which has brought the world economy to an unprecedented synchronized recession, makes for a profound collective global experience It should urge us to reshape our collective actions

COVID-19: A Make or Break Moment for Global Policy Making.

Abstract: The COVID-19 pandemic poses an unprecedented set of challenges to governments, policy makers and citizens; lockdowns and social distancing measures generate significant economic losses, fuel public expenditures and deficits and will no doubt significantly boost public debts. The burden of such measures is also likely to be disproportionately felt by the worse-off members of society and will weigh heavily on future generations. This is both unfair and runs the risk of politically destabilizing the recovery process. To avoid these outcomes unconventional policy measure such as taxes on private wealth and digital economic activities, but also public debt monetization, should be considered. From a political perspective, governments should realize that policy coordination is the only successful exit strategy following a systemic economic shock. While the EU is moving faster than we are accustomed to, it still seems unable to respond quickly enough given the nature of the circumstances. In this picture, the G-20, provided it acts quickly over the coming months, could emerge as the sole global policy forum left on the playing field that can avoid that national interests will prevail eventually producing collectively sub-optimal results in the long-run.

China's Role in Global Development Finance: China Challenge or Business as Usual?

Abstract: China's economic success has prompted both academic political economists and applied policy analysts to speculate about the implications of a new 'China model' of economic development and global ec ...

The Rise of Foreign Direct Investment Regulation in Investment-recipient Countries

Abstract: This research paper seeks to explain why investment‐recipient countries, like Australia and Canada, reject certain investments in strategic industries and shield some domestic business from foreign acquisitions. Existing studies suggest that the decision to restrict FDI is driven by national security concerns, which are often conceptualized as a catch‐all concept. This paper develops a novel theoretical construct – ‘FDI acceptability threshold’ (a maximum point of political tolerance for any given foreign investment) – to provide a more nuanced understanding of government decisions to reject FDI. This theoretical construct is based on four factors – nature of the domestic firm/industry, nature of the acquirer, external opposition, and domestic backlash. Drawing on two cases of Chinese SOEs’ investment in the energy sector in Australia and Canada, this paper demonstrates that investment‐recipient countries are more likely to protect a domestic business where foreign ownership threatens domestic industry by exceeding FDI acceptability thresholds. Given that these thresholds are often not directly identified in the host country’s policies, this paper proposes that host countries should clarify these conditions to ensure that they continue to attract FDI.

The Dangers of Decoupling: Earth System Crisis and the ‘Fourth Industrial Revolution’

Abstract: The question of whether global capitalism can resolve the earth system crisis rests on the (im)possibility of ‘absolute decoupling’: whether or not economic growth can continue indefinitely as total environmental impacts shrink. Ecomodernists and other techno‐optimists argue for the feasibility of absolute decoupling, whereas degrowth advocates show that it is likely to be neither feasible in principle nor in the timeframe needed to ward off ecological tipping points. While primarily supporting the degrowth perspective, I will suggest that the ecomodernists have a wildcard in their pocket that hasn’t been systematically addressed by degrowth advocates. This is the ‘Fourth Industrial Revolution’, which refers to convergent innovations in biotechnology, nanotechnology, artificial intelligence, 3D printing, and other developments. However, I will argue that while these innovations may enable some degree of absolute decoupling, they will also intensify emerging risks in the domains of biosecurity, cybersecurity, and state securitization. Overall, these technologies will not only place unprecedented destructive power in the hands of non‐state actors but will also empower and incentivize states to create a global security regime with unprecedented surveillance and force mobilization capacities. This reinforces the conclusion that mainstream environmental policies based on decoupling should be reconsidered and supplanted by alternative policy trajectories based on material‐energetic degrowth, redistribution, and technological deceleration.