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Government policies and the collapse in trade during the great depression

Government policies and the collapse in trade during the great depression

The fantastic trade collapse

The most known feature of the fantastic Credit Crisis, however, has been the collapse in international trade. As Figure 3 shows, trade fell a lot more steeply after April 2008 than it did in the entire year after June 1929, and the recovery to date has been relatively anaemic. World trade fell in August 2009, following three successive months of growth, but still remains 18% below peak. In comparison, trade fell in three successive years through the Great Depression.

Figure 3 The quantity of world trade, now vs then.

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Government quality and returns to infrastructure investment

Government quality and returns to infrastructure investment

These findings claim that positive rates of returns from infrastructure investment are mediated by the current presence of adequate government institutions. Only certain types of transport infrastructure investment are connected with higher growth over the regions of Europe. Specifically, improvements in secondary road network in sound government quality conditions are associated with higher growth. In comparison, the very popular motorway development schemes which were at the centre of development strategies mainly in the periphery of Europe aren’t linked to the expected economic outcomes, even if promoted by credible, competent, and transparent local governments (which isn’t always the case).

Bali

Government intervention reduces banking globalisation

In this column, we discuss the last explanation.

Government intervention may affect the depth of banking globalisation. On the asset side of a bank’s balance sheet, a disproportionate decrease in cross-border lending following nationalisation constitutes prima facie proof a negative effect on banking globalisation, known as ‘financial protectionism’ by Rose and Wieladek (2014). Within government support, banks were often asked to improve domestic lending. 2 That’s, the ‘home bias’ exhibited by many (see Cerutti and Claessens 2014, Cerutti et al. 2014, De Haas and Van Horen 2012, Giannetti and Laeven 2012, Presbetero et al. 2014, Forbes et al. 2016) will be exacerbated if the lender received a big public intervention, due to natural preference of a regulator or government towards domestic lending. Furthermore, this effect will be a lot more pronounced in an emergency, especially when there exists a market meltdown as banks face competing demands from regulators and funding constraints (Cerutti and Claessens 2014).

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Government investment and fiscal stimulus

Government investment and fiscal stimulus

Fiscal stimulus packages typically feature large investment in infrastructure. The column argues that the fiscal multiplier connected with government investment through the Great Recession was near zero. Meanwhile, the federal government consumption multiplier was around 0.8. Estimates of the multiplier for total government purchases usually do not distinguish both of these effects, which might affect their validity.

Related

Through the Great Recession, governments enacted fiscal stimulus packages to combat the decline in economic activity. Significant shelling out for long-lived investment goods was common to these policies. In america, for example, the American Recovery and Reinvestment Act of 2009 contained provisions to improve funding to spend a lot more than $70 billion on infrastructure and transportation. 1

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Government failures in iceland entranced by banking

Historical background

Traditionally, the Icelandic economy was more regulated and politicised than economies generally in most other Western countries. Economic management was more predicated on discretion than rules, with tight connections between private sector firms and political parties. The bank operating system was politicised with usage of capital predicated on nepotism and political connections.

Government control over the economy has reduced as time passes, with key events being the joining of the European Free Trade Association and the European Economic Area in the first 1990s. The latter meant that Iceland got extensive usage of European markets and adopted European regulations.

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Government financing of r-d

Government financing of r-d

The simulations show that neither (maximising) additionality nor (minimising) redundancy can be an appropriate criterion for evaluation of R&D support policies. Projects with less additionality or more redundancy may generate greater welfare. We also show that both full grants and interest-free loans – which are typical of observed policies – perform much worse that the perfect policy, unless the price of public funds is quite low, or the externality is quite large. Shifting from full grants to interest-free loans generate a considerable welfare gain, unless public funds have become cheap.

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Government bonds and their investors what are the facts and do they matter

New evidence

In a fresh paper, I analyse the composition and evolvement of the investor base over the advanced G20 countries and the Eurozone (Andritzky 2012). The analysis demonstrates a ten percentage point upsurge in the share of bonds held by non-residents is connected with a drop in yields by about 40 basis points and higher volatility.

The investor base for government bonds: What exactly are the facts?

A fresh dataset on the investor composition of government securities in advanced G20 countries shows a big amount of region- or country-specific patterns (Figure 1). Canada, the united kingdom, and the united states – countries with very deep financial markets and highly developed financial systems – exhibit a diversified investor base with significant holdings by all investor types. Europe (and Australia) show deep ties with non-resident investors. On the other hand, Japan and Korea have a minimal share of non-resident holdings but sizable holdings of government entities and state-owned enterprises.

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Government debt and the term premium new results from old data

The results claim that supply effects do play a substantial role in driving longer-term interest levels. There are two caveats on these results. First, if debt managers seek to improve the maturity of debt when longer-term interest levels are expected to go up later on, our results could be somewhat upward-biased. But we remember that in the time we study, many changes in the maturity of debt were led by legislation, instead of any short-run response to advertise conditions (e.g. in 1976 and 2001). And, second, if we extend the estimation sample there is some proof structural instability from 2008 onwards, which could very well be hardly surprising, and additional motivates the usage of the pre-crisis period.

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Government and spatial inequality

Does government quality affect spatial inequality?

Figure 1 demonstrates countries with better quality of government- measured based on the World Bank’s Worldwide Governance Indicators – register lower degrees of spatial inequality. This relationship is confirmed by the econometric analysis, which indicates that the bond between government quality and regional inequality is robust to the inclusion of additional explanatory variables which may be correlated with regional disparities and government quality, such as for example GDP per capita, the amount of trade openness, country and government size, or ethnolinguistic diversity. Furthermore, an instrumental variable approach shows a causal effect running from quality of government to territorial inequality . Specifically, our results provide strong support for the hypothesis that government quality plays a part in the reduced amount of spatial disparities, which underlines the need for institutional factors in the processes of regional growth.