7 research outputs found
The euro area sovereign debt crisis and the sovereign debt Laffer curve: a historic assessment for 1999–2014
his article addresses the historical evolution of sovereign debt trajectories since the beginning of the euro area up to the corresponding sovereign debt crisis, using certain key economic concepts previously proposed by the literature in connection to other historic sovereign debt events. It first recovers the concept of the sovereign debt Laffer curve, which efficiently addresses the non-linear relationship between economic output and public debt issuance. It then presents an important set of theoretic economic concepts that accurately describe the onset of debt vulnerabilities negatively impacting economic growth, therefore linking these fundamental but heterogeneous public debt-related concepts under the unifying concept of the said sovereign debt Laffer curve, which adequately encompasses these heterogeneous concepts. For example, fundamental concepts such as debt vulnerability, ‘debt overhang’, or ‘illiquidity vs. insolvency’ are adequately contextualized under the said Laffer curve. This innovative historical perspective might be useful in the analysis of subsequent sovereign debt crises, as well as in tackling future research in public debt sustainability, namely where the design and implementation of sustainable public debt policies in advanced economies is concerned.info:eu-repo/semantics/publishedVersio
Adaptive early warning systems: An axiomatic approach
The U.S. Subprime Crisis and the subsequent Great Recession have highlighted a renewed interest in the proper design and implementation of Early Warning Systems (E.W.S.), in order to help deter the onset of subsequent extreme financial events, through the implementation of adequate crisis detection mechanisms. The present article describes the Adaptive Early Warning Systems (A.E.W.S.) axiomatic approach, as a natural operational extension to E.W.S. testing. This novel protocol upholds the operational dimension of implementing an efficient holistic crisis detection mechanism, a domain which has been hitherto overlooked by the E.W.S. literature. The paper first describes the major axiomatic principles sustaining the A.E.W.S. protocol, which seek to establish universal principles in support of the said protocol. Second, the article also describes a basic universal template for an A.E.W.S. surveillance platform, which duly describes how multiple testing procedures can be integrated into a single crisis detection framework, while targeting multiple segments of the financial markets (such as the conventional and non-conventional segments of the financial markets). Third, the paper also describes the major advantages and disadvantages associated with the implementation of this novel protocol. It is hoped that the effective implementation of the A.E.W.S. protocol as a novel operational framework in the global macroprudential toolkit might help deter the onset of future extreme financial events, by enabling a greater cohesiveness in E.W.S.-related central banking procedures, as well as promoting a greater international central banking cooperation prior to and during financial distress episodes.info:eu-repo/semantics/publishedVersio
Public debt, GDP and the Sovereign Debt Laffer curve: a country-specific analysis for the Euro Area
This article analyses the non-linear association between public debt and GDP for the Euro Area since the introduction of the euro. It draws on a theoretical concept – the sovereign debt Laffer curve - previously proposed in
literature. Our empirical research design contemplates: (i) estimating a public debt Laffer curve for each Euro Area country; (ii) computing country thresholds from the estimated Laffer curves, i.e., the points beyond which further increases in public debt have damaging effects on output; (iii) analyzing the deviations of the current debt position of each country relative to the respective optimal threshold. We conclude that certain Member States have already gone beyond their optimal thresholds, meaning public debt is already limiting output growth. Our contribution to the field consists in the estimation of country-specific thresholds for each Euro Area Member State. To do this we ran a separate quadratic regression for each country, instead of aggregating multiple countries in a single estimation.info:eu-repo/semantics/publishedVersio
Fiscal sustainability analysis: the case of PALOP economies
The Global Financial Crisis has typically led to a significant widening of fiscal positions (i.e.,
higher budget deficits and public debt). We address the sustainability of public finances in
Portuguese-speaking African countries (PALOP), through adequate econometric testing. Our
findings for the period 1975-2015 suggest that most of the PALOP have compromised the
sustainability of their corresponding fiscal positions, leading these economies to be set on
unsustainable public finance trajectories.info:eu-repo/semantics/publishedVersio
The 2007-2009 subprime crisis and the global public policy response
In this article, we look at the root causes of the 2007-2009 subprime financial crisis in the United States and the ensuing global economic crisis. We then examine how public authorities in advanced economies responded to the crisis. We emphasize that, from the very start, public policy developed along two complementary but distinct lines of intervention: (i) short-term macroeconomic management, and (ii) medium- to long-term reshaping of the financial regulatory framework. We find that the two sub-sets of policies were pursued at the global level and not simply at the national and/or regional level. Finally, we summarize the main risks that emerged as a consequence of the macroeconomic policy response to the crisis, namely high volumes of public debt, an uncertain inflation outlook and the possible development of bubbles in some asset markets.info:eu-repo/semantics/publishedVersio
Fiscal sustainability in the PALOP economies
A Crise Financeira Global conduziu a um aumento significativo das posições fiscais (isto é, défices orçamentais e dÃvida pública mais elevados), dando origem a inúmeras pesquisas académicas relativas à sustentabilidade fiscal. Muito embora existam bastantes estudos sobre a sustentabilidade fiscal nas economias mais avançadas, a nossa contribuição académica amplia este esforço de investigação ao continente Africano. Mais especificamente, analisamos a sustentabilidade das finanças públicas nos PaÃses Africanos de LÃngua Oficial Portuguesa (PALOP’s), através da aplicação de testes de estacionaridade aos rácios de dÃvida externa em percentagem do PIB, bem como a aplicação de testes de cointegração à s receitas e despesas públicas (em percentagem do PIB) destes PaÃses. Os nossos resultados empÃricos para o perÃodo 1975-2019 sugerem que alguns PALOP apresentam uma posição fiscal comprometida do ponto de vista da sustentabilidade fiscal. Com efeito, a condição de solvência apenas é observada para o caso Angolano. Tendo em consideração o impacto económico-financeiro da presente situação pandémica, a questão da sustentabilidade fiscal irá constituir um relevante desafio futuro.info:eu-repo/semantics/publishedVersio
Banking industry performance in the wake of the global financial crisis
This paper analyzes the performance of the banking industry both prior to and during the global financial crisis (GFC). Through the application of a panel regime-switching model designed to capture heterogeneity, our findings suggest that global banking performance can be grouped into two distinctive clusters, each with its own specific regime dynamics. Before the crisis, a cluster of banking institutions pertaining to advanced economies stood out for its buoyant stock market performance, whereas a second cluster, mainly composed of banking indexes that belong to emerging economies, exhibited a more subdued performance. Further, this differentiation was accompanied by low regime synchronization between the clusters. During the crisis, banking institutions behaved similarly, regime synchronization increased, and the differences in the regime dynamics vanished. Finally, the GFC constituted a highly synchronized and systemic extreme financial event, as evidenced by our findings depicting the onset of severe underlying international financial contagion processes.info:eu-repo/semantics/publishedVersio