UNCTAD - Trade and Development Reports (TADR)
Trade and Development Report
2011
- 6 September 2011 Post-crisis
Policy Challenges in the World Economy
Economic integration and interdependence in the world today have reached an unprecedented
level. As a result, the globalized economy cannot function for the benefit of all without international
solidarity and cooperation. This was highlighted by the global financial and economic crisis that
followed the collapse of big financial institutions, and it has underlined the need for developing
approaches to new forms of global collaboration. The G-20, which has become a leading forum for
international economic cooperation, successfully coordinated an immediate policy response to the
crisis, or “Great Recession” as it is now called. Coordinated monetary policy easing by leading
central banks marked the first step, with most members of the G-20 launching large fiscal stimulus
packages as well as emergency support programmes to restore financial stability. The aggregate
impact of these measures stopped the economic freefall and won policymakers an important first
round in battling the crisis. However, despite intense discussions, little progress, if any, has been
achieved in major areas that were also of concern to the G-20. These include financial regulation,
inter alia for tackling problems related to the “financialization” of markets for many primary
commodities, and, even more importantly, reform of the international monetary system for curbing
volatile short-term capital flows that are driven mainly by currency speculation.
Explanatory
notes, Abbreviations & Overview
Overview available
in: French
Spanish
Arabic Chinese
Russian
Chapter I
Current Trends and Issues in the World Economy
A. Recent
trends in the world economy
1. Global growth
2. International trade
3. Recent developments in commodity markets
B. Incomes
policies and the challenges ahead
1. The role of wages in economic growth
2. Incomes policy and inflation control
3. The European crisis and the need for proactive incomes
policies
C. Progress
towards global rebalancing, growth and development:
an assessment of global cooperation
Notes
References
Chapter II
Fiscal Aspects of the Financial Crisis and its Impact on
Public Debt
A. Introduction
B. Fiscal
aspects of the global crisis
1. Fiscal balances and global imbalances before the crisis
2. The evolution of fiscal accounts and the impact of the
crisis
3. Fiscal responses to the crisis
C. T
he evolution of public debt
1. Recent trends in public debt in developed and
developing countries
2. The contribution of non-fiscal factors to debt crises
D. Conclusions
Notes
References
Chapter III
Fiscal Space, Debt Sustainability and Economic Growth
A. Introduction
B. Fiscal
policy challenges
1. Exit strategies and the shift to fiscal tightening
2. Fiscal tightening without a previous stimulus: the
rationale for procyclical fiscal policies
3. The special case of natural-resource-rich countries
C. Qualitative
and quantitative aspects of fiscal space
1. A dynamic and comprehensive view of fiscal space
2. Interest rates and fiscal space
3. Functional finance and fiscal multipliers
D. Dealing
with public debt crises
1. Preventing debt crises
2. Responding to debt crises
3. Debt restructuring
E .
Conclusions:
growing out of debt
Notes
References
Chapter IV
Financial Re-Regulation and Restructuring
A. Introduction
B. What
went wrong?
1. Creation of risk by the financial sector
2. Deregulation and shadow banking
3. The role of lender of last resort at stake
C. Unresolved
issues in financial regulation
1. Self-regulation and endogenous risk.
2. Systemically important financial institutions
3. Volatility of capital flows and the need for capital
controls
4. Liberalization of services and prudential regulation
D. The
unfinished reform agenda and policy recommendations
1. Re-regulation and endogenous risk
2. Beyond re-regulation: towards a restructuring of the
banking system
3. The need for a more balanced banking sector: public and
cooperative banks
4. Building a firewall between commercial and investment
banking
Notes
References
Chapter V
Financialized Commodity Markets:
Recent Developments and Policy Issues
A. Introduction
B. Trends
and developments in financialized commodity markets
C. Commodity
price formation: the roles of information and herd behaviour
1. Information and uncertainty in commodity markets
2. Herd behaviour
D. Financialized
markets: overall impact on commodity price developments
1. Trader positions and commodity prices
2. Price effects of financial investors across different
asset markets
E. Policy
considerations and recommendations
1. Improving transparency in physical commodity markets
2. Improving transparency in commodity futures exchanges
and OTC markets
3. Tighter regulation of financial investors
4. Schemes for dealing with speculative bubbles
Notes
References
Annex to chapter V
Reform of Commodity Derivatives Market Regulations
Chapter VI
The Global Monetary Order and the International
Trading System
A. Introduction
B. New
thinking on global economic governance
C. Destabilizing
private capital flows: back to business as usual
1. Appetite for risk and carry-trade speculation
2. The Japanese yen and the United States dollar as
funding currencies
3. The cost of leaning against the wind of appreciation
D. R
eal exchange rate misalignment in the European Economic and Monetary Union
E. Rules-based
managed floating as a possible solution
1. Flexibility of the nominal exchange rate
2. Towards greater stability of the real exchange rate
3. Exchange rate adjustment according to uncovered interest rate parity
F. Limitations
and effectiveness of managed floating
1. Effectiveness of intervention in foreign exchange
markets
2. The scope and cost of sterilization of foreign exchange
market intervention
G. International
cooperation on exchange rate management
H. Economic
policy and the role of intervention
Notes
References
Selected
UNCTAD publications
Questionnaire
List of tables
1.1 World
output growth, 2003–2011
1.2 Export
and import volumes of goods, selected regions and countries, 2007–2010
1.3 World
primary commodity prices, 2005–2011
1.4 Real
wage growth, selected regions and economies, 2001–2010
2.1 Evolution
of fiscal indicators, selected regions, 1997–2010
2.2 Fiscal stimulus
packages, as announced in selected economies, 2008–2010
List of boxes
Box Page
3.1 Fiscal
stimulus and crowding out
3.2 Fiscal
multipliers
5.1 Views
of commodity market participants: results of an UNCTAD survey
5.2 The
interplay between physical and financial markets
5.3 Sources
of information on commodity market fundamentals
6.1 Slovenia
– a case of successful managed floating
6.2 Sterilized
intervention and the balance sheet of the Chinese central bank
List of charts
Chart Page
1.1 Real
GDP at market prices, 2002–2011
1.2 World
trade volume, January 2000–April 2011
1.3 Net
barter terms of trade, 2000–2010
1.4 Monthly
evolution of commodity prices, exchange rate and world industrial
production, January 2002–May 2011
1.5 Share
of wages in national income, selected economies, 1980–2010
1.6 Total
wage bill and private consumption at constant prices, selected countries,
1996–2010
1.7 Current-account
balances, selected countries and country groups, 2005–2011
1.8 Real
effective exchange rate, selected countries, January 2000–May 2011
2.1 Gross
capital formation, current-account balance and national savings in selected countries,
1990–2010
2.2 Government
revenues and expenditure and fiscal balance in selected regions,
1997–2010
2.3 Ratio
of public debt to GDP in developing countries, by income group,
1970–2010
2.4 Ratio
of total, domestic and external public debt to GDP in developing
countries,
1970–2010
2.5 External
debt in developing countries, by type of debt, 1970–2009
2.6 Contributions
to growth of debt-to-GDP ratio, 1985–2004
3.1 Relationship
between public debt as a percentage of GDP and real long-term
interest rates in Germany, Japan and the United States,
1981–2010
3.2 Comparison
between forecasts of GDP growth, fiscal balances and current-account
balances in I MF-sponsored programmes and actual values
for selected countries
3.3 Real
interest rate and real GDP growth, selected countries, 1991–2010
5.1 Financial
investment in commodities and equities as a share of global GDP,
1998–2010
5.2 Financial
investment in commodities as a proportion of global oil production,
2001–2010
5.3 Different
types of herd behaviour
5.4 Prices
and net long financial positions, by trader category, selected
commodities,
June 2006–June 2011
5.5 Money
manager positions and crude oil prices, January 2009–June 2011
5.6 Correlation
between commodity and equity indexes, 1986–2011
5.7 Dynamics
of world industrial production after the peaks of four business cycles
5.8 Evolution
of commodity and equity prices before and after troughs of selected
business cycles
5.9 Correlation
between financial investments in commodities and selected exchange
rates, January 1986–June 2011
Chart Page
6.1 Short-term
interest rate developments, January 1996–February 2011
6.2 Inflation
and short-term interest rates in emerging market and transition economies,
January 1996–February 2011
6.3 Changes
in exchange rates and reserves, and net portfolio investments, third
quarter 2005–third quarter 2010
6.4 Net
private financial flows (excluding FDI): emerging market and developing
economies, 1990–2010
6.5 Net
positions of non-commercial traders on Australian dollar and Japanese yen
futures, January 2005–April 2011
6.6 Carry-to-risk
ratio, 2005–2010
6.7 Inflation
differential and nominal and real exchange rates in B razil, January
1996–February 2011
6.8 Unit
labour costs and GDP deflator in E MU, 1999–2010
6.9 Current-account
balances in E MU, 1991–2010
6.10 Evolution
of CPI- and ULC-based real effective exchange rates, selected
countries, 1991–2010
6.11 Exchange rates of
selected currencies: actual values and simulated PPP and UIP paths
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UNCTAD Handbook of Statistics:
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UNCTAD X: documents and papers
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UNCTAD investment brief, No. 1, 2007, Foreign
direct investment surged again in 2006 (UNCTAD/ITE/IIA/MISC/2007/2)
01/02/07, 2 Pages, 58 Kb
Transport Newsletter, No. 34, Fourth Quarter
2006 (UNCTAD/SDTE/TLB/2006/5)
31/01/07, 21 Pages, 466 Kb
World economic situation and prospects 2007 (WESP/2007)
Sales no.: E.07.II.C.2
01/01/07, 177 Pages, 1913 Kb
UNCTAD investment brief BRIEF, No. 5, 2006, Top TNCs
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01/12/06, 2 Pages, 55 Kb
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