The growth in government domestic debt : changing burdens and risks

This paper analyzes the recent growth of government domestic debt, including central bank debt, using a new data base on government domestic debt in developing countries with large, open financial systems. On average, government domestic debt grew much faster than GDP between 1994 and 2004 and became larger than foreign debt. The rapid growth of domestic debt reflects financial crises, the growth of central bank debt and the greater attractiveness to governments of issuing domestic debt as well as the recent increase in demands for it. Both its attractiveness and the increased demands for it reflect the current benign international environment to some degree. The main risk of government debt, domestic or foreign, remains its overall size relative to a country's fiscal, financial, and political institutions. While government domestic debt can help the domestic private capital market, large domestic debt, like large external debt, has risks. For example, there can be"sudden stops"in the demand for domestic debt as well as in foreign lending. Governments need to be aware of the risks and burdens in domestic debt issue-crowding out small borrowers, transferring risks to banks when issuing longer maturity, fixed-interest domestic debt and reducing returns, and imposing risks on holders of pensions, annuities, and life insurance policies. Growth of central bank debt can divert central banks from pursuit of the objective of price stability.Debt Markets,Banks&Banking Reform,External Debt,,Emerging Markets

Banking in developing countries in the 1990s

During the 1990s commercial bank deposits and capital rose relative to GDP in the major developing countries. This rise largely reflected the dramatic fall in inflation of the 1990s and financial liberalization. But much of this growth in banks'loanable funds was absorbed by increased net holdings of central bank debt and of government debt. Much of the rise in government debt reflected post-crisis restructurings, notably in Brazil, Indonesia, and Mexico, but rising deficits also played a role. Bank intermediation between depositors and private sector borrowers remained limited in many countries despite financial liberalization. The post-crisis restructurings raise two important issues: the poor performance of loans that was revealed by the crisesand the future crowding-out that will result from the spreading-out of the cost of the crisis over time and the inability to retire the restructuring-related debt. The absorption of deposits in nonprivate sector credit, the growth of offshore finance of the private sector, and the poor performance of loans suggest a weakening of the link between the traditional measure of financial depth, M2/GDP, and economic growth and development. The changes in the 1990s also raise issues such as the potential for future deposit growth, the riskiness of bank portfolios, banks'increased dependence on government solvency, the access to credit for firms unable to access global markets, the foreign exchange exposure of countries, and the implications of the ongoing changes in regulation and supervision.Financial Intermediation,Payment Systems&Infrastructure,Economic Theory&Research,Banks&Banking Reform,Financial Crisis Management&Restructuring,Banks&Banking Reform,Financial Intermediation,Economic Theory&Research,Financial Crisis Management&Restructuring,Financial Economics

Opening the capital account : a survey of issues and results

The increase in trade, the increasing internationalization of production and the improvements in communications, together with the legalization of foreign currency instruments in a growing number of countries, have led to a de facto liberalization of the capital account. In line with the greater reliance on open goods markets and a de facto opening of the capital account, developing country governments are raising questions about fully opening the capital account. As a background to answering these questions, this paper surveys the existing literature on opening up domestic capital markets, much of which was written prior to the debt crisis. This survey begins with a brief summary of the costs and benefits of capital account liberalization, paying particular attention to the issue of the loss of policy effectiveness and noting the new theories of capital flows based on international portfolio diversification of risky assets, which raise the possibility of benefits from capital account liberalization that are not linked solely to higher investment rates. The survey then reexamines the evidence on the results of open capital accounts. Finally, the survey revisits the question of sequencing the liberalization of the current and capital accounts, to provide a background for programs to liberalize the capital account.International Terrorism&Counterterrorism,Economic Theory&Research,Banks&Banking Reform,Environmental Economics&Policies,Macroeconomic Management

Dynamics of N=4{\cal N}=4 supersymmetric field theories in 2+1 dimensions and their gravity dual

In this note we consider ${\cal N}=4$ SYM theories in 2+1 dimensions with gauge group $U(N)\times U(M)$ and $k$ hypermultiplets charged under the $U(N)$. When $k > 2(N-M)$, the theory flows to a superconformal fixed point in the IR. Theories with $k <2(N-M)$, on the other hand, flows to strong coupling. We explore these theories from the perspective of gravity dual. We find that the gravity duals of theories with $k < (N-M)$ contain enhancons even in situations where repulson singularities are absent. We argue that supergravity description is unreliable in the region near these enhancon points. Instead, we show how to construct reliable sugra duals to particular points on the Coulomb branch where the enhancon is screened. We explore how these singularities reappear as one moves around in Coulomb branch and comment on possible field theory interpretation of this phenomenon. In analyzing gauge/gravity duality for these models, we encountered one unexpected surprise, that the condition for the supergravity solution to be reliable and supersymmetric is somewhat weaker than the expectation from field theory. We also discuss similar issues for theories with $k=0$.Comment: 31 pages, 12 figure

Studies with some terpenoids

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Simulated Trading for Maryland's Nitrogen Loadings in the Chesapeake Bay

We investigate nutrient trading for point and non-point sources for the Bay Restoration Fund in Maryland. We demonstrate how to use the proceeds from the tax revenue to mimic a market by trading high-cost upgrades of sewage treatment plants for low-cost winter cover crops. Under an optimistic assumption about costs for non-point sources and naïve assumptions about the lag from planting cover crops to changes in nitrogen load, we calculate that 100 percent of abatement could be achieved at 56 percent of total costs, while in a pessimistic scenario, 100 percent of abatement could be could be achieved at 83 percent of total costs.Chesapeake Bay, cover crops, nitrogen abatement, nutrient trading, sewage treatment plants, trading ratios, water pollution, Environmental Economics and Policy,

Nutrient Trading, the Flush Tax, and Maryland's Nitrogen Emissions to the Chesapeake Bay

We investigate nutrient trading for point and non-point sources for the Bay Restoration Fund in Maryland. We demonstrate how to use the proceeds from the tax revenue to mimic trading high-cost upgrades of sewage treatment plants for low-cost winter cover crops. Under an optimistic assumption about costs for non-point sources, we calculate that abatement could be increased by more than 50%, while in a pessimistic scenario, abatement could be increased by 2%. We also explore the role of uncertainty in determining the appropriate trading ratio between point and non-point sources of pollution, showing that the higher uncertainty associated with non-point sources should induce a lower trading ratio.Chesapeake Bay, cover crops, nitrogen abatement, nutrient trading, sewage treatment plants, trading ratios, water pollution, Environmental Economics and Policy,

India - Effective incentives in India's agriculture : cotton, groundnuts, wheat and rice

This study explicity considers the possibilities of international trade in evaluating the impact of incentives in agriculture. Specifically, the study estimates three standard coefficients (ratios): (a) the nominal protection coefficient (NPC); (b) the effective protection coefficient (EPC); and (c) the effective subsidy coefficient (ESC). The study also includes estimates of the nominal protection coefficient adjusted for a premium on foreign exchange (ANPC) and some discussion of how such a premium would affect the EPCs and ESCs. Four commodities are covered in this study; wheat, rice, cotton and groundnuts. The estimates for the protection coefficients for the four commodities for the 1980s are summarized, and estimates of comparable domestic and world prices are given. Cotton, and to a lesser extent wheat and rice, have been disprotected during the 1980s while groundnuts have received substantial protection. The study also raises a number of important issues that deserve further research.Economic Theory&Research,Environmental Economics&Policies,Crops&Crop Management Systems,Agricultural Research,Access to Markets