The impact of sovereign wealth funds on global financial markets

If sovereign wealth funds act similarly to private investors and thus allocate foreign assets according to market capitalisation rather than liquidity considerations, official portfolios reduce their “bias” towards the major reserve currencies — the US dollar and the euro. As a result, more capital flows “downhill“ from rich to less wealthy economies. In this scenario, the euro area and the United States would be subject to net capital outflows while Japan and the emerging markets would attract net capital inflows. The potential implications of a rebalancing of international capital flows for stock prices, interest rates and exchange rates remain uncertain, however. The authors wish to thank Marcel Fratzscher for excellents comments. The views expressed in this paper are those of the authors and do not necessarily reflect those of the European Central Bank.     

Private equity,Islamic finance,and sovereign wealth funds in the MENA region

The Middle East and North Africa region has experienced a significant amount of activity in the past few years, despite the worldwide economic problems caused by the subprime crisis. A strong influx of petrodollar reserves, sustainable economic growth, limited reliance on leverage, and limited exposure to the global credit markets have kept the region relatively outside the economic mishaps overwhelming a number of economies, especially in the West. Shariah‐compliant, Islamic private equity funds and the use of sovereign wealth funds as sources of private equity in the region are two important evolutionary developments to watch in the next few years. © 2008 Wiley Periodicals, Inc.     

金融危机下主权财富基金投资的风险控制与策略

占有总额约2万亿美元的资产,主权财富基金是近年来最受瞩目的国际投资者.此次美国次贷危机引起全球金融市场剧烈波动,且已由虚拟经济向实体经济蔓延,而以长期投资为主的主权财富基金被认为在一定程度上可对全球动荡的经济起到稳定器的作用,因此,对金融危机下主权财富基金的投资策略的研究具有重大的意义.     

Capability and need: A framework for understanding why states create sovereign wealth funds

Over the past half‐century, roughly one‐quarter of states in the international system have created sovereign wealth funds (SWFs). As a case of sovereign states investing public wealth mostly in private markets across borders, it is not altogether clear why SWFs have proliferated to this extent. What explains their spread in recent decades? In this paper, I build on a multidisciplinary literature that conceives of SWFs as a type of insurance against external risk and argue that middle economic powers that are highly exposed in global trade and capital markets are the states most likely to establish these institutions. Such states possess both the capability to create an SWF of a size sufficient to insure against risk and the need for the insurance function of a SWF by virtue of their relatively vulnerable position in the global economy. To evaluate my argument, I rely on a data set consisting of all states in the international system from 1950 to 2012 including the 48 SWFs created during that period. I find that middle economic powers with high degrees of trade and capital openness are the states most likely to create SWFs.     

Sovereign wealth funds: National security risks in a global free trade environment

The proliferation of sovereign wealth funds (SWFs) has resulted in an unstable political, legal, and regulatory environment for this form of foreign direct investment (FDI). This article explains SWF growth over the last half‐century; discusses issues surrounding SWF “transparency” and host‐country national security risk; reviews the legal and regulatory structures governing FDI in major national economies; examines proposed regulatory approaches to structure the FDI environment; and concludes with a discussion of SWF regulatory policy recommendations addressing corporate governance principles, national security restrictions on equity investment, and investment reciprocity, and suggests recommendations for executives considering engaging an SWF investment partner. © 2009 Wiley Periodicals, Inc.     

Transformation of China's sovereign wealth fund since the 2008‐2009 global crisis

China Investment Corporation (CIC) transformed its initial investment strategy of focusing mainly on the US financial sector during 2007‐2008 into a new strategy of diversified investments across geography and sectors since 2009. Massive financial losses and domestic political backlash during the global financial crisis of 2008 gave impetus to CIC's rethinking of strategy. In the midst of the crisis, CIC engineered a capacity‐building and reorganization exercise to reposition itself for a new strategy that has since allowed for more diversification of investments. A more receptive global investment climate for sovereign wealth funds has also aided CIC's efforts to present itself as a responsible global investor and facilitated its investments. Postcrisis, CIC's new strategy of diversification is characterized by continued investments in the financial sector, but with new investments increasingly directed to real sectors of energy, natural resources, and real estate in both developed and emerging economies. Notwithstanding a global recovery that is fraught with uncertainties, CIC's judicious timing in making diversified investments, and its attention to reducing risks and enhancing returns, have been rewarded by an impressive turnaround in performance since 2009. Going forward, the success and sustainability of the new strategy will be contingent on how well CIC can navigate domestic bureaucratic rivalry and the shifting climate of the international investment environment in the medium to long term. Ultimately, CIC's shareholder, the government of the People's Republic of China (PRC), holds the key to its future direction and goals. © 2012 Wiley Periodicals, Inc.     

Accounting for sovereign tail risk in emerging economies: The role of global and domestic risk factors

This paper evaluates the role of global and domestic risk factors in explaining sovereign tail risk for 18 emerging economies. Sovereign tail risk is defined as the likelihood of a sharp rise in sovereign credit risk. We find that both global and domestic risk factors contribute significantly to sovereign tail risk, with explanatory power increasing with the severity of tail risk in a non-linear fashion. Indeed, their contributions have become stronger following the global financial crisis. In particular, global liquidity conditions, commodity prices and economic growth are ranked as the major risk factors for sovereign tail risk among the EMEs.     

Endogenous financial intermediation and real effects of capital account liberalization

We consider lending and investment under asymmetric information in a small, developing economy. We allow different forms of financial contracts to arise endogenously. Financial intermediaries mitigate a moral hazard problem in investment choice through costly monitoring. We then examine the impact of opening the capital account on both welfare and the structure of lending contracts. Liberalizing the capital account may improve or worsen the efficiency of financial intermediaries, leading to an improvement or worsening of the aggregate composition of investment projects. We show that efficient financial intermediaries in the closed economy are neither necessary nor sufficient for a capital account liberalization to improve welfare.     

ICT,conflicts in financial intermediation and financial access: evidence of synergy and threshold effects

In this study we investigate the role of information and communication technology (ICT) in conflicts of financial intermediation for financial access. The empirical evidence is based on contemporary (or current values) and non-contemporary (or lagged by a year) quantile regressions in 53 African countries for the period 2004-2011. The main findings are: First, the net effect of ICT in formalization for financial activity in the banking system is consistently beneficial with positive thresholds. The fact that corresponding, unconditional and conditional effects are persistently positive is evidence of synergy or complementary effects. Second, the net effect of ICT in financial informalization for financial activity in the financial system is negative with a consistent negative threshold. Hence, the positive (negative) complementarity of ICT and financial formalization (informalization) is an increasing (decreasing) function of financial activity. Policy measures on how to leverage the synergy or complementarity between ICT and financial formalization in order to enhance financial access are discussed.     

The role of sovereign credit ratings in fiscal discipline

This paper investigates several aspects of the relationship between sovereign credit ratings and fiscal discipline. The analysis of over one thousand country–year observations for 93 countries during the 1999–2010 period reveals that a country's debt level is likely to increase with higher ratings, confirming the existence of pro-cyclicality and path dependence of ratings. In addition, the study finds no evidence to support the theory of Political Business Cycle, which implies that political ambitions may lead to fiscal worsening following a rating upgrade. The study findings further demonstrate that institutional quality is an important factor in the ratings–fiscal discipline nexus.     

Interpersonal versus interbank lending networks: The role of intermediation in risk-sharing

Analyzing the interpersonal lending network of a Hungarian village in a disadvantaged region, we find strong intermediary activity and a tiered core-periphery structure. We show that the main motive behind lending is not altruism or profit-seeking, but risk-sharing which is the most accentuated in poor-to-poor and Roma-to-Roma relations. Comparing this informal lending market to a formal interbank market, we find more similarities than differences. In both markets, intermediation is a key element in risk-sharing and an effective tool to cope with liquidity risk. Regulatory and development policies should respect the existing institutions of risk-sharing.     

The role of innovation in driving the economy: Lessons from the global financial crisis

The global financial crisis hit nearly every country in the world, devastating their economies, decimating the financial resources of their companies and citizens, and nearly collapsing the banking systems in their countries. While risky financial instruments and bad home lending practices receive much of the blame for this downturn, too few innovations introduced in the years leading up to the crisis also contribute to this collapse or, at a minimum, deepening the resulting recession. This paper draws on theoretical literature and contemporary media accounts, building the argument for a significant impact of innovations on the economy and its potential role in pulling the US economy out of the financial crisis. The paper develops propositions based on this review and discusses implications for staving off future economic difficulties.     

财务分析在财务管理中的作用

作为预测的前提,财务分析同样也是过去经营活动的总结.把财务分析作为财务管理的重要手段,用其能了解企业的财务状况及经营成果,可为领导提供决策依据.对企业财务分析的研究有着重要的现实意义,拟就目前我国企业财务分析中存在问题进行探讨,并提出相应对策.     

Interaction in euro area sovereign bond markets during the financial crisis

Applying a t-DCC-GARCH model to daily spread data, four phases of interaction in euro area sovereign bond markets are identifi ed between January 2008 and June 2013. The initial period (January-October 2008) is followed by a general rise in pairwise correlation values between November 2008 and late 2009/early 2010. Interaction then declines on a piecemeal basis up to early 2012. In autumn 2012, coinciding with the announcement of the Outright Monetary Transactions programme by the European Central Bank, there is evidence of some reengagement of bond markets with one another. Policy then seems to have had an infl uence on euro area sovereign bond market behaviour. While it can act to calm markets, policy may also be unduly infl uencing market dynamics and raising moral hazard issues.     

高校经费来源结构与财务风险问题研究

本文在概述高校经费来源渠道与结构的基础上,阐述分析了高等院校财务风险的种类与形成过程,进一步从内部与外部两个方面提出了防范应对高校财务风险的方法与建议,在优化高校资金来源结构的同时分化财务风险。     

Financial connectedness of BRICS and global sovereign bond markets

The paper examines the financial connectedness via return and volatility spillovers between Brazil, Russia, India, China and South Africa (BRICS) and three global bond market indices represented by the United States of America (USA), European Monetary Union (EMU) and Japan for the period 01 January 1997 to 27 July 2016 (weekly data). We find that Russia followed by South Africa is the net transmitter of shocks within BRICS, implying that the risk arising from these markets may have an adverse impact on others in BRICS. However, China and India exhibit weak connectedness, suggesting that these markets may be useful for hedging and diversification opportunities in BRICS. The networks of pairwise spillover results further confirm this. Among global indices, China appears as highly interconnected with the USA. USA is the strongest transmitter of shocks to BRICS bond indices. The panel data results further confirm the significant determinants of net directional spillover. Thus, we can conclude that BRICS is a heterogeneous asset class even in the case of the bond market. India and China are the markets to look for better risk management strategies.     

The global financial crisis and Islamic finance

The conventional view holds that the current global financial crisis was caused by extraordinarily high liquidity, reckless lending practices, and the rapid pace of financial engineering, which created complex and opaque financial instruments used for risk transfer. There was a breakdown of the lender‐borrower relationship and informational problems caused by a lack of transparency in asset market prices, particularly in the market for structured credit instruments. There was outdated, lax, or absent regulatory‐supervisory oversight; faulty risk management and accounting models; and the emergence of an incentive structure that not only encouraged excessive risk taking but also created a complicit coalition of financial institutions, real estate developers and appraisers, insurance companies, and credit rating agencies whose actions led to a deliberate underpricing of risk. Such a crisis would not have occurred under an Islamic financial system—due to the fact that most, if not all, of the factors that have caused or contributed to the development and spread of the crisis are not allowed under the rules and guidance of Shariah. The current global financial crisis is largely seen as a real test of the resilience of the Islamic financial services industry and its ability to present itself as a more reliable alternative to the conventional financial system. © 2011 Wiley Periodicals, Inc.     

The future of the global financial services industry

There are three fundamental technological shifts that are defining the competitive landscape of the early 21st century in financial service provision. First and foremost is distributed service provision: both deposit taking and credit provision are becoming more and more dispersed geographically, with less and less need for service providers and service users to meet face to face. The principal enabling technology is in advanced telecommunications, which allows for operation of widely dispersed automatic teller machines, videoconferencing, and internet operations. The second huge technological change that is underway concerns internal management information systems. Financial institutions are now able to put relevant data from affiliates and activities around the world into real-time globally accessible form. The third technological change is financial engineering, which involves creation of new financial products, often derived from existing credit or deposit-type instruments. This article explores the implications of these dramatic changes in the competitive landscape of financial service provision and suggests strategies for survival into the 21st century.     

The global financial crisis: Some suggestions for reform of the global financial architecture in the light of Islamic finance

The article argues that the primary cause of the current subprime mortgage crisis in the United States is the absence of adequate market discipline in the financial system. This tends to promote excessive lending, high leverage, speculation, and an unsustainable rise in asset prices. Unwinding later on gives rise to a vicious cycle of selling that feeds on itself and leads to a steep decline in asset prices followed by financial crisis and economic slowdown. The solution lies in introducing risk sharing along with the availability of credit for primarily the purchase of real goods and services that Islamic finance aims at introducing. This can help inject greater discipline into the system and, thereby, substantially reduce financial instability. Since the introduction of greater discipline into the financial system may deprive the subprime borrowers of credit, the article also discusses the need for finding ways of satisfying their genuine credit needs. © 2011 Wiley Periodicals, Inc.