This paper builds on recent research examining the impact of finance on economic outcomes. Specifically, it asks whether credit extended to households and firms has an impact on the share of exports in gross domestic product and on the trade balance.
... See More + The analysis finds that although household credit is not positively related to export shares or trade balances, firm credit is significantly related to both. The relationship with export shares is particularly strong and robust. Higher shares of credit going to firms means a higher export share in gross domestic product and stronger trade balances (any effect of credit on imports is subsumed by the larger effect on exports). Household credit has a negative or insignificant relationship with the trade balance and the share of exports in gross domestic product. Credit may also affect the choice between types of goods produced domestically, not just whether they are produced for export or domestic consumption. The paper finds that household credit has a negative relationship with the share of manufacturing in gross domestic product. Firm credit is positively associated with the share of manufacturing in gross domestic product, while the share of services does not seem to be affected by either.
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Policy Research Working Paper WPS8082 JUN 01, 2017
A strong legal framework that forms the basis for the activities of debt managers is crucial for enabling an effective public debt management function.
... See More + This paper aims to complement discussions on the legal foundations of debt management by detecting and discussing essential elements that allow the government to issue sukuk, the equivalent of bonds, in Islamic finance. Drawing on the cases of recent sovereign issuers, these discussions begin with outlining the clear provision of a mandate to issue and to employ certain public assets in the execution of underlying transactions, as well to establish, engage with, and administer Special Purpose Vehicles used in structuring these issuances. Additional aspects that need to be addressed are the treatment of proceeds and the assurance of investors with regards to debt service. The enabling environment should be complemented by changes in the taxation regime and financial market regulations that facilitate the issuances.
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The development objective of the Debt Management Strengthening Programme Project is to strengthening institutional capacity of Development (DPCO) to undertake its enhanced role of managing market and credit risks.
... See More + The World Bank Group (WBG) Pakistan Country Partnership Strategy 2015-19 is structured around four strategic themes, or result areas: energy, private sector development, inclusion, and service delivery. These reports provide key information on the compliance with the strategic targets approved in the MTDS 2015/16-2018/19. The emphasis of this indicator is on improving the quality of these reports that were produced bi-annually in 2015/16. As per Fiscal Responsibility and Debt Limitation Act (FRDLA), DPCO is mandated with the preparation of fiscal and debt policy statements to be submitted to the National Assembly by January of each year. It has been fulfilling this responsibility since inception. In addition, since 2013, DPCO started to undertake some basic analysis to compare alternative borrowing strategies. In April 2014, DPCO prepared the first-ever Medium Term Debt Management Strategy (MTDS) for Pakistan (2014-18) that was approved by the Finance Minister. A revision was completed in May 2016 when the Medium Term Debt Management Strategy for Pakistan (2016-19) was published. The latter document shows a substantive improvement regarding the clarity of the targets the debt manager should pursue. The updated MTDS stipulates following key strategic guidelines during 2015/16 – 2018/19: (i) gradually lengthen the maturity profile of domestic debt; (ii) pursuing a smooth redemption profile, especially in the domestic debt; (iii) availing maximum available concessional external financing; and indicated (iv) preference of foreign currency funding in US Dollar over other currencies keeping in view the balance of payment requirements and existing external debt obligations.
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On March 31, 2017, International Development Association (IDA) Board of Governors adopted resolution number two hundred and thirty-nine. It was resolved that general increase in subscriptions of the Association shall be authorized on the following terms and conditions: authorization of subscriptions and contributions; agreement to pay; payment; mode of payment; currency of denomination and payment; effective date; advance contributions; commitment authority; heavily indebted poor countries (HIPC) contributions; authorization of grants, guarantees, equity investments, and risk intermediation; administration of IDA17 funds under the eighteenth replenishment; and allocation of voting rights under eighteenth replenishment.
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As a consequence of the financial crisis, national and international regulatory bodies have started to ask what the consequences would be of a multinational banking group becoming insolvent.
... See More + Insolvency of a group is not necessarily insolvency of each of its constituent entities; some will not be insolvent individually and can be disposed of, others will need recapitalizing, and finally the group parent may capture all of the losses and then be dissolved. Within the euro area, single supervisory mechanism (SSM) has entered into force, centralizing banking supervision for the euro area in the hands of the European Central Bank. Under political pressure, banking groups must adopt measures to avoid becoming supported by the taxpayers again. The usual answer may be that banking crises should be better prevented by imposing requirements that strengthen the banks’ financial condition and reduce their risk profile, while risk management should be considerably upgraded. The recovery and resolution mechanisms that are now on the agenda in many jurisdictions may offer a new perspective. In the recovery phase, the board is responsible for preparing the bank for a possible resolution. This work should be done in a structured way and should result in the recovery plan, established promptly and updated regularly, to be approved by the prudential supervisor. Although this requirement applies specifically to the banking activity, it might be useful to consider it for important firms in other sectors as well.
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International Debt Statistics (IDS) 2017 focuses on financial flows, trends in external debt, and other major financial indicators for low, middle and high-income countries.
... See More + This report includes more than 200 time series indicators from 1970 to 2015 for most reporting countries. This year’s edition of International Debt Statistics, successor to Global Development Finance and World Debt Tables, and the fourth in the series, is designed to respond to user demand for timely, comprehensive data on trends in external debt in low- and middle-income countries. It also provides summary information on the external debt of high-income countries and public (domestic and external) debt for a select group of countries. By providing comprehensive and timely data that reflects the latest additions and revisions, and by expanding the scope of the data available online, the authors aim to serve the needs of the users and to reach a wider audience. This report is an indispensable resource for governments, economists, investors, financial consultants, academics, bankers and the entire community. The printed edition of International Debt Statistics 2017 now provides a summary overview and a select set of indicators, while an expanded dataset is available online (datatopics.worldbank.org / debt/ids).
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Controlling for bond and issuer characteristics, bond spreads are expected to be equal across different legal jurisdictions, and differences are expected to disappear through arbitrage.
... See More + However, an analysis of 435 U.S. dollar–denominated bonds issued by 53 emerging market sovereigns during 1990-2015 reveals that after the financial crisis of 2008, the launch spread of sovereign bonds issued under U.K. law has been higher than those issued under U.S. law, by 130 basis points for BB+ bonds and 175 basis points for B- bonds. This effect was not significant for investment grade bonds. On average, bonds issued under U.K. law had weaker ratings and shorter tenors post-crisis. The post-crisis impact of governing law on sovereign bond spreads is not explained by collective action clauses, or first-time bond issuances. Instead, the difference seems to be related to the perception that U.S. law offers stronger investor protection, and that the investor base for bonds issued under U.S. law is larger than that for bonds issued under U.K. law. The difference in spreads persists in the secondary market even after 180 days, perhaps because of the lack of liquidity, as investors tend to buy and hold these more attractive bonds on a longer term basis.
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Policy Research Working Paper WPS7863 OCT 17, 2016
Subnational debt levels in developing countries are becoming increasingly significant as central governments continue to decentralize spending responsibilities, revenue-raising authority, and borrowing rights to subnational governments (SNGs).The World Bank, in collaboration with other partners, has developed a global knowledge program on subnational fiscal reform and debt management.
... See More + The program aims to strengthen developing countries’ institutional capacity to maintain subnational fiscal sustainability and prudent debt management alongside a stable macroeconomic framework; effective infrastructure finance to support inclusive growth; and capital market development. A key component of this global knowledge program is the application of the Debt Management Performance Assessment (DeMPA) methodology for SNGs.The DeMPA is a methodology for assessing the full range of government debt management functions through a comprehensive set of indicators. It highlights strengths and weaknesses in debt management practices and facilitates the design of plans to build and augment capacity and institutions tailored to specific needs of a country. The indicator set for the central government (the sovereign DeMPA) has evolved as an internationally recognized standard in the central government debt management (DeM), and was updated in July 2015.The subnational DeMPA highlights strengths and weaknesses at the level of subnational DeM practices. This performance assessment facilitates the design of plans to build and augment capacity and institutions tailored to the specific needs of a subnational. The subnational DeMPA (SN DeMPA) also facilitates the monitoring of progress over time in achieving the objectives of subnational DeM in a manner consistent with international sound practice.
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