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    The politics of financial regulation expertise: international financial organizations and expert networks
    (Boston University Global Economic Governance Initiative, 2015-07) Ban, Cornel; Seabrooke, Leonard; Freitas, Sarah; Boston University Frederick S. Pardee School of Global Studies
    Who controls global policy debates on shadow banking regulation? By looking at the policy recommendations of the Bank of International Settlements, the International Monetary Fund and the Financial Stability Board, we show how experts tied to these institutions secured control over how shadow banking is treated. In so doing, these technocrats reinforced each other’s expertise and excluded some potential competitors (legal scholars), coopted others (select Fed and elite academic economists). The findings have important implications for studying the relationship between IOs technocrats and experts from other professional fields.
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    Housing price volatility and the capital account in China
    (Boston University Global Economic Governance Initiative, 2015-07) Tian, Yuan; Gallagher, Kevin P.; Boston University Frederick S. Pardee School of Global Studies
    China experienced significant volatility in its housing market from 2005‐2013. Economists analyzing the determinants of volatility in these markets find that the bubble was largely been driven by factors specific to the Chinese economy and Chinese economic policy. In this paper, we examine the extent to which a) short-­‐ term capital flows may have further impacted the prices and volatility in the Chinese housing market and b) whether China’s 2006 Capital Account Regulations (CARs) on foreign purchases of Chinese real estate were effective in reducing the level and volatility of prices in China’s housing markets. According to our OLS baseline model, we find that short-­‐term capital flows from abroad had a modest impact on price increases in the Chinese housing market, but a more significant impact on increasing market volatility. In terms of Chinese 2006 CAR, the measures did not appear to have impact on reducing housing prices, but had a strong impact on reducing volatility in Chinese housing market. The results from a supplementary quantile regression analysis show that hot money magnified the impacts of capital flows on housing prices during upward surges in the housing price. In terms of market volatility, our quantile regressions suggest that the more volatile the housing market became, the larger the impact short-­‐term capital flows had on accentuating such volatility. Furthermore, we find that the 2006 CARs continued to have a strong impact on reducing volatility in the Chinese housing market during the period under study.
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    The state and the firm: China’s energy governance in context
    (Boston University Global Economic Governance Initiative, 2015-03) Cunningham, Edward A.; Boston University Frederick S. Pardee School of Global Studies
    This paper focuses primarily on the evolution of China’s domestic energy governance, the waves of centralization and decentralization that have characterized the relationship between industry and government in this sector, and the resulting structure of China’s energy industries. It is important to understand both the fragmentation of the governance structure and mechanisms available to the Chinese state, and the twin processes of ownership and investment diversification that have shaped the bulk of China’s natural energy market. This domestic context provides a useful framework for further analysis of China’s energy and natural resource investments abroad.
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    Austerity versus stimulus? Understanding fiscal policy change at the International Monetary Fund since the Great Recession
    (Boston University Global Economic Governance Initiative, 2014-03) Ban, Cornel; Boston University Frederick S. Pardee School of Global Studies
    Since 2008 the IMF has become more open to the use of discretionary fiscal stimulus packages to deal with recessions, while changing its doctrine on the timing and content of fiscal consolidation. Rather than constitute a paradigm shift, these changes amounted only to a careful recalibration of its pre-crisis fiscal orthodoxy. The paper traces this evolution of the Fund’s doctrine to staff politics, more diverse thinking in mainstream economics and a careful framing of the message through the use of mainstream macroeconomic models. The findings contribute to the emerging debate on the internal sources of intellectual and policy change in international economic organizations.
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    Reinventing development banking in frontier economies: the case of Romania
    (Boston University Global Economic Governance Initiative, 2014-02) Patenaude, Bryan N.; Boston University Frederick S. Pardee School of Global Studies
    Since its accession into the European Union in 2007, Romania has consistently fallen short of its development objectives for the 2007-2013 period. Of particular concern is Romania’s repeated failure to obtain sufficient and sustainable fiscal and financial resources for domestic development. While discussion and analysis of underlying problems has been prolific, the obscurity, generality, and uncoordinated nature of proposed solutions continue to hinder progress.1 With these shortcomings in mind, this paper uses case studies, personal interviews, and policy analysis to examine two key aspects of development finance: EU funds absorption, and development banking. Following the examination are specific recommendations on how Romania should address the issues at hand in order to improve development financing over the 2014 – 2020 period. Regarding EU funds, steps to mimic the successful absorption models of Poland and Czech Republic through regionalization of fund management have failed due to insufficient interparty dialogue, political deadlock, barriers to skills diffusion, and inadequate resources for monitoring. The evidence suggests that instead of regionalization, a centralized and coordinated approach to EU fund management should be taken via management authority consolidation. Additionally, clear priorities for EU fund use and a set of best practices regarding risk assessment should be implemented so that banks, applicants, and government ministries are on the same page in terms of project acceptability. To facilitate transparent, coordinated, and successful EU funds use, management should be consolidated into two development banks. While capitalizing a new bank would be difficult, if not infeasible, the existing capital and financial infrastructure vested in the two public banks, ExIm Bank and CEC Bank, is sufficient to meet current needs. Specifically, ExIm Bank should expand operations and take on the role of managing authority for funds allocated to long-term infrastructure development, export-oriented SMEs, and long-term agricultural investment. CEC Bank should take on the role of managing authority for funds allocated to human capital development, agriculture, and domestic SMEs. The transition should begin with ExIm Bank as a two-year trial and be expanded to CEC Bank, which presently faces greater volatility in terms of stakeholder view of future operations.
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    Is there more room to negotiate with the IMF on fiscal policy?
    (Boston University Global Economic Governance Initiative, 2014-11) Ban, Cornel; Boston University Frederick S. Pardee School of Global Studies
    During the 1980s the IMF emerged as a global “bad cop,” demanding harsh austerity measures in countries faced with debt problems. Has the Great Recession changed all that? Is there more room to negotiate with the Fund on fiscal policy? The answer is yes. If we take a close look at what the IMF researchers say and what its most influential official reports proclaim, then we can see that there has been a more “Keynesian” turn at the Fund. This means that today one can find arguments for less austerity, more growth measures and a fairer social distribution of the burden of fiscal sustainability. The IMF has experience a major thaw of its fiscal policy doctrine and well‐informed member states can use this to their advantage. These changes do not amount to a paradigm shift, a la Paul Krugman’s ideas. Yet crisis‐ridden countries that are keen to avoid punishing austerity packages can exploit this doctrinal shift by exploring the policy implications of the IMF’s own official fiscal doctrine and staff research. They can cut less spending, shelter the most disadvantaged, tax more at the top of income distribution and think twice before rushing into a fast austerity package. This much is clear in all of the Fund’s World Economic Outlooks and Global Fiscal Monitors published between 2009 and 2013 with regard to four themes: the main goals of fiscal policy, the basic options for countries with fiscal/without fiscal space, the pace of fiscal consolidation, and the composition of fiscal stimulus and consolidation.
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    Financialization and the resource curse: the challenge of exchange rate management in Brazil
    (Boston University Global Economic Governance Initiative, 2014-09) Gallagher, Kevin P.; Magalhães Prates, Daniela; Boston University Frederick S. Pardee School of Global Studies
    A stable and competitive exchange rate is imperative for efforts to diversify an economy in an open economy setting. However, there are an increasing number of exogenous economic and political factors in Brazil and other emerging market economies that accentuate the difficulties of shifting toward a more developmentalist economic policy. Nevertheless, over the past decade or more Brazil has developed a broad array of tools that enable the country to address the exogenously determined factors related to exchange rate instability. These tools have been a modest success at best, but lay the groundwork for what may be the necessary economic policies and political conditions for a more comprehensive program to achieve stability‐led diversified growth in Brazil.
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    Solid waste management and social inclusion of waste pickers: opportunities and challenges
    (Boston University Global Economic Governance Initiative, 2014-09) Marello, Marta; Helwege, Ann; Boston University Frederick S. Pardee School of Global Studies
    In this paper we explore the opportunities and challenges inherent in the model of cooperation between municipal solid waste systems (MWSs) and waste picker cooperatives (WPCs). There is growing enthusiasm about waste picker inclusion, often as part of ‘integrated solid waste management.’ The World Bank and the InterAmerican Development Bank, for example, have both funded projects to support waste picker integration into formal sector recycling. Advocacy organizations such as WIEGO have called for an intensification of such efforts through access to credit and technology, as well as through partnerships to collect recyclables in underserved communities. These measures have given many waste pickers higher standards of living, economic security and a sense of inclusion in society. [TRUNCATED]
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    Exporting national champions: China’s OFDI finance in comparative perspective
    (Boston University Global Economic Governance Initiative, 2014-06) Irwin, Amos; Gallagher, Kevin P.; Boston University Frederick S. Pardee School of Global Studies
    Scholars have compared China’s liberalization, inward FDI attraction, and export promotion policies to those of its "Asian Miracle" predecessors to assess China as a 'developmental state.' We build on that literature by drawing a new but similar comparison: the extent to which Chinese development banks have financed the globalization of China’s ‘national champion’ firms. We focus on the role of state finance in promoting China’s outward foreign direct investment (OFDI) in comparative perspective. In order to answer this research question, we created a database of Chinese finance for OFDI and compared our results to the existing literature on previous developmental states. We estimate the total value of China’s OFDI finance from 2002‐2012 at $140 billion. As a percentage of total OFDI, China’s lending is roughly three times 55% higher than Japan, the previous global leader in OFDI finance. Like Japan and South Korea at earlier developmental stages, China’s lending also goes overwhelmingly toward natural resource acquisition, though to a much greater degree. Unlike Japan or Korea, we find that China’s market entry has more to do with developing project expertise and supporting exports than it does with tariff‐hopping or outsourcing industries that are fading on the mainland. We identify two major reasons for China’s high (31%) ratio of OFDI lending to total OFDI. First, China has a greater incentive to give OFDI loans than Japan or Korea ever did because its borrowers are state‐owned so it can more easily dictate how they use the money. Second, China has a greater capacity to give OFDI loans because it has significantly higher savings and foreign exchange reserves than Japan and Korea, both today and especially during equivalent developmental stages.
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    Regulating capital flows in emerging markets: the IMF and the Global Financial Crisis
    (Boston University Global Economic Governance Initiative, 2014-05) Gallagher, Kevin P.; Tian, Yuan; Boston University Frederick S. Pardee School of Global Studies
    In the wake of the financial crisis the International Monetary Fund (IMF) began to publicly express support for what have traditionally been referred to as ‘capital controls’. In addition to public statements, the IMF underwent a systematic re-­‐ evaluation of Fund policy on the matter, and published an official view on the economics of capital flows. In this view the IMF concluded that capital account liberalization is not always the most optimal policy and that there are situations where capital controls—rebranded as ‘capital flow management measures’—are appropriate. This paper empirically examines the extent to which the change in IMF discourse on these matters has resulted in significant changes in IMF policy advice. To answer this question we create a database of IMF Article IV reports and examine whether the financial crisis had an independent impact on IMF support for capital controls. We find that the IMF’s level of support for capital controls has increased as a result of the crisis and as the vulnerabilities associated with capital flows accentuate.
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    On fairness and freedom: the WTO and ethical sourcing initiatives
    (Boston University Global Economic Governance Initiative, 2014-05) Thrasher, Rachel; Boston University Frederick S. Pardee School of Global Studies
    Although the concepts of fair trade and free trade have little to do with one another, in the context of public procurement, the two come head to head. Proponents of free trade argue that governments should act like private market actors when purchasing; others hold that governments are obligated to promote justice and equality by way of procurement “linkages” to social policy like fair trade. An increased awareness of the importance of sustainability has re‐opened the debate over whether governments should link their spending to social concerns. In Europe a sustainable approach to public procurement is commonplace and EU enthusiasm has reached the WTO. A Revised GPA seeks to encourage broader acceptance of the agreement by including exceptions for environmental and social policy linkages. The exceptions include a general exception in cases where derogation is “necessary to protect human, animal or plant life or health”, excludes public procurement in international development assistance from the scope of the agreement, and explicitly permits governments to apply technical specifications for environmental protection. A recent case against sustainable public procurement in the Netherlands demonstrates the space given countries in Europe to select and implement their own procurement practices. Countries vary widely in their government procurement. Although the EU maintains a region‐wide consensus toward encouraging ethical sourcing and consumption, other regions have not created the same supportive structure. Within the WTO, it is even clearer that policies creating obstacles to liberalized trade would be less favorable than other policies, regardless of the reason for those obstacles. We conclude that while the Revised GPA has made more policy space for governments to prioritize development and environmental goals, it does not go far enough. Future revisions of the GPA should provide policy space for horizontal linkages, including those aimed at long‐term sustainability.
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    Crossing the ocean by feeling for the BITs: Investor‐state arbitration in China’s bilateral investment treaties
    (Boston University Global Economic Governance Initiative, 2014-05) Irwin, Amos; Boston University Frederick S. Pardee School of Global Studies
    Although China began to sign bilateral investment treaties (BITs) in the 1970s, it refused to grant foreign investors the right to sue their host government in international arbitration tribunals. Few realize that China’s treaty negotiators have in fact abandoned this restriction in almost every Chinese BIT signed since 1998, including those with Latin America. Scholars have suggested that China reversed its policy in order to support Chinese overseas investors or to fit its general economic liberalization strategy. However, China’s BITs with Mexico, Peru, and Colombia as well as its arbitration case with Peru contradict these theories. I argue that China began signing open BITs to test the risks of granting open access to European countries and the United States, for whom open access is a key condition. China experimented gradually with open arbitration, just as it has experimented gradually with many economic changes since Reform and Opening began in 1978. This theory has interesting implications for China’s future BITs—as international arbitration tribunals threaten to make this experiment permanent, China has added new restrictions that bring China’s BITs closer to the US model and make a US-­‐China BIT more likely. However, the US avoids BITs with capital-­‐exporting countries, and China is now a large capital-­‐exporter. The main obstacle to US-­‐China BIT negotiations may no longer be the two nations’ differences, but rather their similarities.
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    From cocktail to dependence: revisiting the foundations of dependent market economies
    (Boston University Global Economic Governance Initiative, 2013-12-02) Ban, Cornel; Boston University Frederick S. Pardee School of Global Studies
    Recent contributions to the comparative political economy of East European capitalisms have found that a distinctive variety of capitalism emerged in some new EU member states. The new variety has been dubbed “dependent market economy” (DME). This paper makes several contributions to this literature. First, it marshals evidence to show that this institutional variety now includes the political economy of Romania, a case previously excluded from it. More importantly, this analysis also finds that earlier scholarship on dependent capitalism has failed to capture crucial mechanisms of dependence created by transnationalized finance. Third, the paper suggests that some of the arguments made in the existing scholarship on the interests of foreign capital with regard to domestic innovation and labor training need to be qualified. Finally, by showing reflexivity towards select critiques of the dependent market economy framework, the analysis proposes by this paper is a self-limited attempt to bridge the differences between the varieties of capitalism and Polanyian analyses of capitalist diversity in semi- peripheral middle-income states.
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    Financial stability and the Trans-Pacific Partnership: lessons from Chile and Malaysia
    (Boston University Global Economic Governance Initiative, 2013-10) Gallagher, Kevin P.; Ffrench-Davis, Ricardo; Lim, Mah-Hui; Soverel, Katherine; Boston University Frederick S. Pardee School of Global Studies
    There is growing recognition that nations may need to deploy cross-border financial regulations to prevent and mitigate financial crises. Indeed, in December of 2012 the International Monetary Fund (IMF) agreed on a new ‘institutional view’ that notes how the IMF will begin to recommend that nations deploy cross-border financial regulations going forward. However, many nations have become party to global, regional, and bi-lateral trade and investment treaties that may restrict their ability to effectively deploy such regulations. This paper examines the cases of two countries currently in negotiations for a Trans-Pacific Partnership Agreement (TPP): Chile and Malaysia. The paper examines the extent to which each nation has deployed cross-border financial regulations in the past, and the extent to which they have negotiated the policy space for such regulations in its previous trade and investment treaties. Finally, it analyzes the extent to which such measures would be permitted if the TPP’s investment provisions looked like the model bi-lateral investment treaty of the United States. We find that, with some important exceptions, both countries have successfully deployed crossborder financial regulations and have carved out the ability to do so under a sample of representative trading commitments. However, such policy space would be jeopardized if the TPP conformed to the US model rather than arrangements that each country has been able to broker in other arenas.
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    Changing the textbooks? Crisis and aperture at the IMF’s teaching institutes
    (Boston University Global Economic Governance Initiative, 2013-08-11) Ban, Cornel; Boston University Frederick S. Pardee School of Global Studies
    Using insights from the sociology of knowledge and findings from preliminary empirical probes into IMF research since the Great Recession, this paper aims to propose a new analytical framework for the study of the teaching activities of the IMF’s teaching infrastructure: the Institute in Washington DC and in two regional centers: the Brazil-based Joint Regional Training Center for Latin America (BTC) and the Joint Vienna Institute (JVI). How have these institutes negotiated the “productive incoherence” that marks the Fund’s new stances on fiscal and financial economics? How have the students in these institutes internalized the conflicts between the research of IMF staff on these policy areas and the Fund’s official positions in a time of uncertainty and aperture? If indeed IMF teaching is reflexive, has the BTC teaching incorporated more dissenting views than the IMF Institute or the JVI, given the more systematic embrace of heterodox ideas by the policy mainstream of Brazil, BTC’s co-sponsor? To address these questions this working paper suggests a few recalibrations of the existing literature on the diffusion of economic ideas via IFIs. To this end, it extracts several new analytical propositions from the sociology of knowledge.
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    Capital openness and income inequality: smooth sailing or troubled waters?
    (Boston University Global Economic Governance Initiative, 2017-04) Lagarda, Guillermo; Linares, Jennifer; Gallagher, Kevin P.; Boston University Frederick S. Pardee School of Global Studies
    The 2008 Financial Crisis and subsequent financial turbulence has triggered economists and policymakers to revisit the extent to which capital account liberalization is optimal for all countries at all levels of development. While that literature has largely concluded that capital account liberalization may have detrimental effects on growth and accentuate financial instability in emerging markets, relatively little literature has examined the impacts of capital account liberalization on inequality—a subject that has also been under intense study over the past decade as well. In this paper, we attempt to build upon and bridge these two literatures to examine the extent to which capital account liberalization is associated with income inequality in emerging market and developing countries. We confirm earlier studies that show there is such a relationship between increased capital account openness and increases in inequality, and that capital account regulations are associated with less inequality—at least for emerging market economies. We expand on these findings to learn that there are differential impacts of capital account liberalization on inequality during booms and busts, being financial development a key factor. During normal times we find that there are positive impacts on income inequality, whereas during busts capital account liberalization appears to exacerbate inequality, calling for active policies.
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    Climate finance and developing countries: the need for regime development
    (Boston University Global Economic Governance Initiative, 2016-10) Selin, Henrik; Boston University Frederick S. Pardee School of Global Studies
    The Paris Agreement in Article 2 calls for “making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development” in support of a global transition towards sustainability. Climate finance include all forms of financial support from public, private and alternative sources that target low-carbon and climate-resilient development in all countries of the world. As a critical equity and justice issue to help the most vulnerable that have contributed very little to the problem, Article 9 of the Paris Agreement stipulates that developed countries shall provide financial resources to assist developing countries to help them reduce GHG emissions and adapt to a changing climate. The stated climate finance goal is for developed countries to mobilize jointly at least USD 100 billion a year from public and private sources by 2020, to be scaled up over time as part of the implementation of the Paris Agreement. The international climate finance regime set up to support developing countries towards this target involves a large number of actors, funds and mechanisms as financial support comes in many different forms. Existing estimates of current climate finance flows from multilateral, bilateral and private sources, however, are highly uncertain and subject to much controversy based on unavailability of data, methodological variations, and disagreements over what should be counted as climate finance. [TRUNCATED]
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    Financing sustainable infrastructure in the Americas
    (Boston University Global Economic Governance Initiative, 2016-07) Studart, Rogério; Ramos, Luma; Boston University Frederick S. Pardee School of Global Studies
    Latin America and the Caribbean (LAC) has achieved considerable social and economic progress in the past three decades. However, the region still lags behind many other parts of the world when it comes to key infrastructure areas - including sanitation, telecommunications, transportation and energy. These infrastructure gaps are now proving to be hurdles for productivity and competitiveness, which in turn threatens continued sustainability of growth paths. Besides positively affecting growth, infrastructure investments shape future energy and transportation matrixes, urban landscapes, and a significant part of the supply and quality of public goods and services. They define how natural resources will be used in the future, and consequently are an opportunity to address other interrelated threats to the well-being of the people living in LAC, namely environmental degradation and climate change. Therefore, investing in sustainable infrastructure may be virtually a “silver bullet” to the long-term prosperity, environmental sustainability, and the well-being of people of the region. [TRUNCATED]
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    National development banks and sustainable infrastructure; the case of KfW
    (Boston University Global Economic Governance Initiative, 2016-07) Griffith-Jones, Stephany; Boston University Frederick S. Pardee School of Global Studies
    KfW was initially founded in 1948 to finance the reconstruction of war-torn Germany after World War II. The initial capital of the KfW was financed by Marshall Plan resources, provided by the US government. Additional expansions of capital have been basically funded from profits of KfW itself which reflects the efficiency with which it operates, and the high commercial, as well as developmental, quality of its loans. KfW has expanded significantly over the years, both in Germany and internationally. It has become the second largest commercial bank in Germany. Its large scale and its function as a German government instrument to implement a clear energy strategy has allowed it to play a key role in Germany to finance major energy transformation in the country and one of the most important energy transformations in Europe (known as Energie wende).[TRUNCATED]
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    The sustainable infrastructure finance of China development bank: composition, experience and policy implications
    (Boston University Global Economic Governance Initiative, 2016-07) Wang, Yongzhong; Boston University Frederick S. Pardee School of Global Studies