Is financial globalisation in retreat? This column suggests it might be. There’s been a recent and significant retreat in European financial integration and a retrenchment of global banking (although capital inflows into emerging markets and FDI are only just below their recent peaks). What are we to make of this shift? A more compartmentalised global financial system could certainly reduce the likelihood of a financial crisis spreading from one country to the next. But there is now a danger that the pendulum could swing too far, Policymakers should therefore do more to remove limitations on FDI and investor purchases of foreign equities and bonds, balancing the trade-off between the need for stability and the need to provide financing for economic growth.
Unemployment is once again the bane of the US and Europe. This column highlights an intriguing association between home ownership and high unemployment using US state-level data. Given the heavy subsidisation of and rise in home ownership, this association merits more attention from economists.
In response to the civil lawsuit filed by the US Department of Justice in February 2013, Standard & Poor's affirms that its ratings were "objective, independent and uninfluenced by conflicts of interest". This column presents empirical evidence opposing this claim. The data suggests a systematic rating bias in favour of the agencies' largest issuer clients.
Russian involvement in Cyprus was widely recognised during the acute phase of the most recent EZ crisis. This column argues that some of this is driven by corruption-linked money laundering. Using official Russian statistics, the authors estimate a standard model of FDI location to identify usual patterns related to nations with lax anti-money laundering measures such as Cyprus and the British Virgin Islands. Funds from such nations were biased towards locating investments in the most corrupt Russian regions compared to a group of genuine foreign investors.
Do higher government wages reduce corruption? This column argues that they do, but only in relatively poor countries. When a country’s poor, higher government wages reduce bureaucrats’ incentive to extract illegal incomes. However, as income per capita rises, higher government wages gradually lose their effectiveness in combating corruption.
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