Fund Management and Systemic Risk - Lessons from the Global Financial Crisis

Fund managers play an important role in increasing efficiency and stability in financial markets. But research also indicates that fund management in certain circumstances may contribute to the buildup of systemic risk and severity of financial crises. The global financial crisis provided a number of new experiences on the contribution of fund managers to systemic risk. In this article, we focus on these lessons from the crisis. We distinguish between three sources of systemic risk in the financial system that may arise from fund management: insufficient credit risk transfer to fund managers; runs on funds that cause sudden reductions in funding to banks and other financial entities; and contagion through business ties between fund managers and their sponsors. Our discussion relates to the current intense debate on the role the so-called shadow banking system played in the global financial crisis. Several regulatory initiatives have been launched or suggested to reduce the systemic risk arising from non-bank financial entities, and we briefly discuss the likely impact of these on the sources of systemic risk outlined in the article

Sectoral Transformations in Neo-Patrimonial Rentier States: Tourism Development and State Policy in Egypt

This article challenges claims that liberalising state regulated markets in developing countries may induce lasting economic development. The analysis of the rise of tourism in Egypt during the last three decades suggests that the effects of liberalisation and structural adjustment are constrained by the neo-patrimonial character of the Egyptian political system. Since the decline of oil rent revenues during the 1980s tourism development was the optimal strategy to compensate for the resulting fiscal losses. Increasing tourism revenues have helped in coping with macroeconomic imbalances and in avoiding more costly adjustment of traditional economic sectors. Additionally, they provided the private elite with opportunities to generate large profits. Therefore, sectoral transformations due to economic liberalisation in neo-patrimonial Rentier states should be described as a process, which has led to the diversification of external rent revenues, rather than to a general downsizing of the Rentier character of the economy