Effects of Global Financial Crisis

of 13 /13
Effects of global financial crisis on developing countries [presented @ ATN12, Accra, August’09] Michael Herrmann Economic Affairs Officer Macroeconomics and Development Policies UNCTAD, Geneva, Switzerland U N ITED N ATIO NS CO NFERENCE O N TRADE AND DEVELO PM ENT (UNCTAD) CO NFÉRENCE DES N ATIO N S UN IES SUR LE CO M M ERCE ET LE DÉVELO PPEM ENT (CNUCED)

Embed Size (px)

description

 

Transcript of Effects of Global Financial Crisis

  • 1. Effects of global financial crisis on developing countries [ presented @ ATN12, Accra, August09 ] Michael Herrmann Economic Affairs Officer Macroeconomics and Development Policies UNCTAD, Geneva, Switzerland
  • 2. This presentation
    • Financial effects
    • Economic effects
      • Economic slowdown
      • Commodity price decline
      • Possible aid effects
    • Political effects
    • Concluding thoughts
      • The make-up of crisis
      • Policies to discourage future crisis
      • Policies to address unraveling crisis
  • 3. Financial effects
  • 4. Economic effects: Economic slowdown
  • 5. Economic effects: Economic slowdown
    • Economic slowdown
    • discourages exports of all countries, but especially of countries with high exports to developed countries.
    • encourages fall commodity prices, which affects many of the poorest developing countries.
    • discourages investment in all countries, but especially in poorer developing countries which are perceived to be riskier.
    • encourages increased profit remittances from developing countries to developed.
    • discourages workers remittances from developed countries to developing countries.
  • 6. Economic Effects: Commodity price decline
  • 7. Political effect: Possible aid effect
  • 8. Political effect: Possible aid effect
  • 9. Concluding thoughts
    • The make-up of financial and economic crisis
  • 10. Concluding thoughts
    • Policies to discourage future crisis:
    • Strengthen micro-prudential regulations
      • Focus: Stability of individual financial institutions Risk management (capital adequacy ratio, i.e. capital/ risk, where risk is assets), corporate governance, accountability, transparency, long-term horizon of management
      • Agency: Financial supervisory agencies
    • Strengthen macro-prudential regulations
      • Focus: Stability of financial system Risk management (counter-cyclical regulations, incl. capital adequacy requirements, reserve requirements), moral hazard, buy-in of financial institutions
      • Key agencies: financial supervisory agencies and central banks
  • 11. Concluding thoughts
    • Policies to discourage future crisis (contd.):
    • Consider prudential controls on capital inflows
      • Tobin-type taxes: Reduce reliance on short-term, volatile capital inflows; exposure to maturity and currency mismatches; volatility of exchange rates; upward pressure on currencies.
    • Encourage timely alignments of exchange rates
      • International macroeconomic coordination to encourage prevent large and prolonged exchange rate misalignments and build-up of large and sustained external imbalances; companies can go out of business, countries cannot.
  • 12. Concluding thoughts
    • Policies to address unraveling crisis:
    • Controls on capital outflows
    • Blank guarantees for deposits
    • Rescue of systemically relevant financial institutions
    • Pursuit of counter-cyclical macroeconomic policies
    • Leakages in open economies
    • Risk of protectionism
    • Risk of other bagger-thy-neighbor policies
    • Importance of intl. policy coordination
    • Importance of social protection
  • 13. Concluding thoughts
    • Financial markets have for some time had an independent capacity to destabilize developing countries; there are now increasing indications of the vulnerability of all countries to financial crisis.[] Overall, there appears to be a need for more collective control and guidance over international finance.
    • The Trade and Development Report 1990.