The new international financial architecture: bail-ins, bail-outs, bail-ups and newspeak

The term ‘bailing in the private sector’ is used to describe several quite different proposals with the common feature that they all seek to make private lenders to developing countries share in the costs of financial or currency crises in these countries. The International Monetary Fund (IMF) regards it as one of the main pillars of the ‘new international financial architecture’ — that is, the package of proposals for reforming the international financial system that is intended to reduce the frequency and severity of financial and currency crises in emerging markets. The other pillars of the IMF’s proposed package are transparency, prudential regulation of financial institutions, cautious liberalisation of international capital markets and the implementation of codes of international best practice for making and documenting economic policies

Distortions to Agricultural Incentives in Indonesia

Distorted incentives, agricultural and trade policy reforms, national agricultural development, Agricultural and Food Policy, International Relations/Trade, F13, F14, Q17, Q18,

How Economic Growth Reduces Poverty: A General Equilibrium Analysis for Indonesia

Poverty, Inequality, Growth, Indonesia

Agricultural Protection in a Food Importing Country: Indonesia

This paper summarizes two country-specific studies which examine the degree and changing patterns of incentives to domestic agriculture in Malaysia and Vietnam. Malaysia stands out in the developing world for its long-standing commitment to maintaining a relatively open trade and investment policy regime. However excessive assistance given to paddy farmers remains a major distortion in agricultural incentives. Market oriented reforms in Vietnam began in the late 1990 with attempts to unshackle domestic agriculture, and reforms in this areas have been wide-ranging, with the exception of excessive assistance provided to sugar cane producers. The impressive reform outcome in agriculture has played a pivotal role in sustaining the momentum of reforms, assuring the continuation of market-oriented reforms. However, remain a major anomaly in the incentive structure.International Relations/Trade,

Negative gearing Redux

Should the interest paid by landlords on loans used to finance the purchase of rented houses and apartments be tax deductible? There is widespread agreement that interest payments should be deductible at least up to the amount of the landlord’s ‘net rent’ — meaning the actual rent, minus all expenses other than interest payments. In this paper, we revisit Australia’s controversial ‘negative gearing’ (NG) arrangements, under which investors can also deduct negative cash flows — defined as the excess of interest payments over earnings net of depreciation and other non-interest expenses — from their other taxable income. We focus on NG of investments in rental housing, but the principles apply also to other investments, such as equities and bonds

Capital gains, negative gearing and effective tax rates on income from rented houses in Australia

This paper reports estimates of effective tax rates on rental property income in Australia. We consider three capital gains tax regimes – the current Australian system, that which prevailed between 1985 and 1999 and a realisation tax that attempts to mimic an accruals tax. We report estimates for each regime in two scenarios—slow anticipated real capital gains and very rapid unanticipated real capital gains. Our results suggest that negative gearing should be retained and capital gains taxation reformed to approximate an accruals tax. We argue that this desirable package would be no harder to administer than the current regime

Adjustment costs and the neutrality of income taxes

A yes income tax would not affect asset values or investment decisions for given values of cash flows and pre-tax interest rates (Samuelson, 1964). However, most so-called income taxes do not fully tax capital gains on accrual. This note shows that in the absence of adjustment costs, investment decisions are not distorted by the lack of a comprehensive tax on the capital gains on unimproved land, provided that the depreciation of improvements is allowed as a tax deduction. It also provides the intuition underlying the closely related results of Hartman (1978) and Abel (1983)

Banking collapse and restructuring in Indonesia, 1997-2001

Most of Indonesia’s banking system collapsed during the 1997–98 financial and economic crisis. We estimate that the net cost to taxpayers of the government’s blanket guarantee of banks’ liabilities, issued in February 1998, is about 40 per cent of annual GDP. Large banks fared worse in the crisis than small ones and state banks fared worse than private ones. Despite this, and despite the fact that bank capital turned out to have been inadequate, the government reduced the capital requirements for all banks, transferred the assets of closed banks, together with the lowest quality loans of those that were recapitalized, to a state-owned holding company, and thus excluded the private sector from participating in the process of liquidating these assets. The government offered to recapitalize several banks jointly with the private sector, but participation was restricted to the former owners, and even they could only participate on very unfavorable terms. As a result, too many banks were closed, too many nationalized and several were unnecessarily merged. We propose a more market oriented approach that would have strengthened banks by raising capital requirements and also minimized fiscal costs by auctioning those that failed to meet these requirements. In the case of insolvent banks, bidders should have been invited to submit tenders for taking over both their assets and liabilities. In all cases, bidders should have been able to choose between liquidating banks and keeping them operational, after injecting enough cash to meet the new capital adequacy requirements

Banking Collapse and Restructuring in Indonesia , 1997-2001

https://www.cato.org/sites/cato.org/files/serials/files/cato-journal/2002/11/cj22n2-6.pd