Achieving European Policy Objectives through Financial Technology. ECRI Commentary No. 17, 16 November 2015

Alistair Milne argues in this ECRI Commentary that ‘FinTech’ (newly emerging Financial Technologies) can play a crucial role in achieving European policy objectives in the area of financial markets. These notably include increasing access by smaller firms to trade credit and other forms of external finance and completing the banking and capital markets unions. He points out, however, that accomplishing these objectives will require a coordinated European policy response, focused especially on promoting common business processes and the adoption of shared technology and data standards.

Financial regulatory transparency: new data and implications for EU policy. Bruegel Policy Brief 2015/20, December 2015

International financial institutions have promoted financial regulatory transparency, or the publication by supervisors of financial industry data. Financial regulatory transparency enhances market stability and increases democratic legitimacy. • We introduce a new index of financial regulatory data transparency: the FRT Index. It measures how countries report to international financial institutions basic macroprudential data about their financial systems.The Index covers 68 high-income and emerging-market economies over 22 years (1990-2011). • We find a number of striking trends over this period. European Union members are generally more opaque than other high-income countries.This finding is especially relevant given efforts to create an EU capital markets union. • Globally, financial regulatory data transparency has increased. However, there is considerable variation. Some countries have become significantlymore transparent, while others have become much more opaque. Reporting tends to decline during financial crises. • We propose that the EU institutions take on a greater role in coordinating and possibly enforcing reporting of bank and non-bank institution data. Similar to the United States, a reporting requirement should be part of any EU general deposit insurance scheme.

One market, two monies: the European Union and the United Kingdom. Bruegel Policy Brief Issue 2016/01 January 2016

Access to the single market is one of the core benefits of the United Kingdom’s membership of the European Union. A vote to leave the EU would trigger difficult negotiations on continued access to that market. However, the single market is not static. One of the drivers of change is the necessary reforms to strengthen the euro. Such reforms would not only affect the euro’s fiscal and political governance. They would also have an impact on the single market, in particular in the areas of banking, capital markets and labour markets. This is bound to affect the UK, whether it remains in the EU or not.

The United States dominates global investment banking: does it matter for Europe? Bruegel Policy Contribution 2016/06, March 2016

In the aftermath of the global financial crisis, the market share of US investment banks is increasing, while that of their European counterparts is declining. We present evidence that US investment banks are on the verge of taking over pole position in European investment banking. Meanwhile, since 2015, Chinese investment banks have overtaken American and European investment banks in the Asia-Pacific market. Credit rating agencies and investment banks are the gatekeepers of the capital markets. The European supervisory institutions can effectively supervise the European operations of these US-managed players. On the political side, we suggest that the European Commission should continue to view its, albeit declining, banking industry as a strategic sector. The Commission, the European Central Bank and the Bank of England should jointly develop a strategic agenda for the EU-US Regulatory Dialogue. Finally, corporates rely on investment banks to issue new securities. We recommend that the big European corporates should cherish the (few) remaining European investment banks, by giving them at least one place in otherwise US- dominated banking syndicates. That could help to avoid complete dependence on US investment banks.

More Union for the EU’s IPO Market. ECMI Commentary No. 41/23 March 2016

n his assessment of the latest draft prospectus Regulation, published on 30 November 2015, Karel Lannoo argues in this ECMI Commentary that the text goes somewhat further than the European Commission has previously entertained, but it falls short of creating a European market. In his view, the Commission is hostage to its own (or member states’) unwillingness to expand the powers of the European Securities and Markets Authority (ESMA) to become an EU-wide listing authority. In short, the Union that the EU wants to create for capital markets still seems a distant ambition.

Economic impact of Southern European member states exiting the eurozone. Policy Brief #2012/06

While Greece defaulting on its sovereign debt and leaving the European Monetary Union would in and of itself have a relatively minor effect on the world economy, such a move could, however, undermine investor confidence in the Portuguese, Spanish and Italian capital markets and thus provoke not only a sovereign default in those states as well, but also a severe worldwide recession. This would in turn reduce economic growth by a total of 17.2 trillion euros in the world’s 42 largest economies in the lead-up to 2020. Hence it is incumbent upon the community of nations to prevent Greece from a sovereign default as well as leaving the euro, and the domino effect that this event could induce.

The Effects of Sanctions and Counter-Sanctions on EU-Russian Trade Flows. CEPS Commentary, 5 July 2016

After Russia annexed Crimea in early 2014 and then intervened, manu militari, in the Eastern part of Ukraine, the European Union wanted to show its disapproval and put pressure on Russia to change its behaviour. A wide variety of measures were taken, including the imposition of individual restrictions, such as asset freezes and travel bans, but also the suspension of development loans from the EBRD. But the EU (together with the United States) also took, in July and September 2014, a set of broader measures: limited access to EU primary and secondary capital markets for targeted Russian financial institutions and energy and defence companies; export and import bans on trade in arms; an export ban for dual-use goods and reduction of Russia’s access to sensitive technologies and services linked to oil production.

Essays on the Effects of Corporate Taxation

Cette thèse est une collection de trois articles en macroéconomie et finances publiques. Elle développe des modèles d'Equilibre Général Dynamique et Stochastique pour analyser les implications macroéconomiques des politiques d'imposition des entreprises en présence de marchés financiers imparfaits. Le premier chapitre analyse les mécanismes de transmission à l'économie, des effets d'un ré-échelonnement de l'impôt sur le profit des entreprises. Dans une économie constituée d'un gouvernement, d'une firme représentative et d'un ménage représentatif, j'élabore un théorème de l'équivalence ricardienne avec l'impôt sur le profit des entreprises. Plus particulièrement, j'établis que si les marchés financiers sont parfaits, un ré-échelonnement de l'impôt sur le profit des entreprises qui ne change pas la valeur présente de l'impôt total auquel l'entreprise est assujettie sur toute sa durée de vie n'a aucun effet réel sur l'économie si l'état utilise un impôt forfaitaire. Ensuite, en présence de marchés financiers imparfaits, je montre qu'une une baisse temporaire de l'impôt forfaitaire sur le profit des entreprises stimule l'investissement parce qu'il réduit temporairement le coût marginal de l'investissement. Enfin, mes résultats indiquent que si l'impôt est proportionnel au profit des entreprises, l'anticipation de taxes élevées dans le futur réduit le rendement espéré de l'investissement et atténue la stimulation de l'investissement engendrée par la réduction d'impôt. Le deuxième chapitre est écrit en collaboration avec Rui Castro. Dans cet article, nous avons quantifié les effets sur les décisions individuelles d'investis-sement et de production des entreprises ainsi que sur les agrégats macroéconomiques, d'une baisse temporaire de l'impôt sur le profit des entreprises en présence de marchés financiers imparfaits. Dans un modèle où les entreprises sont sujettes à des chocs de productivité idiosyncratiques, nous avons d'abord établi que le rationnement de crédit affecte plus les petites (jeunes) entreprises que les grandes entreprises. Pour des entreprises de même taille, les entreprises les plus productives sont celles qui souffrent le plus du manque de liquidité résultant des imperfections du marché financier. Ensuite, nous montré que pour une baisse de 1 dollar du revenu de l'impôt, l'investissement et la production augmentent respectivement de 26 et 3,5 centimes. L'effet cumulatif indique une augmentation de l'investissement et de la production agrégés respectivement de 4,6 et 7,2 centimes. Au niveau individuel, nos résultats indiquent que la politique stimule l'investissement des petites entreprises, initialement en manque de liquidité, alors qu'elle réduit l'investissement des grandes entreprises, initialement non contraintes. Le troisième chapitre est consacré à l'analyse des effets de la réforme de l'imposition des revenus d'entreprise proposée par le Trésor américain en 1992. La proposition de réforme recommande l'élimination des impôts sur les dividendes et les gains en capital et l'imposition d'une seule taxe sur le revenu des entreprises. Pour ce faire, j'ai eu recours à un modèle dynamique stochastique d'équilibre général avec marchés financiers imparfaits dans lequel les entreprises sont sujettes à des chocs idiosyncratiques de productivité. Les résultats indiquent que l'abolition des impôts sur les dividendes et les gains en capital réduisent les distorsions dans les choix d'investissement des entreprises, stimule l'investissement et entraîne une meilleure allocation du capital. Mais pour être financièrement soutenable, la réforme nécessite un relèvement du taux de l'impôt sur le profit des entreprises de 34\% à 42\%. Cette hausse du taux d'imposition décourage l'accumulation du capital. En somme, la réforme engendre une baisse de l'accumulation du capital et de la production respectivement de 8\% et 1\%. Néanmoins, elle améliore l'allocation du capital de 20\%, engendrant des gains de productivité de 1.41\% et une modeste augmentation du bien être des consommateurs.

Estudio Económico de América Latina y el Caribe 2016: La Agenda 2030 para el Desarrollo Sostenible y los desafíos del financiamiento para el desarrollo

En su edición número 68, que corresponde al año 2016, el Estudio Económico de América Latina y el Caribe consta de tres partes. En la primera se resume el desempeño de la economía regional en 2015 y se analiza la evolución durante el primer semestre de 2016, así como las perspectivas de crecimiento para el año. Se examinan los factores externos e internos que han incidido en el desempeño económico de la región y se destacan algunos de los desafíos para las políticas macroeconómicas en un contexto externo caracterizado por el bajo crecimiento y elevados grados de incertidumbre. En la sección temática de este Estudio se analizan los desafíos que tienen los países de América Latina y el Caribe en el ámbito interno y externo para movilizar el financiamiento del desarrollo. En lo interno, la desaceleración del crecimiento y las mayores restricciones fiscales imponen importantes retos a la movilización de recursos. En lo externo, la condición de países de renta media dificulta el acceso al financiamiento externo concesionado o de la cooperación internacional. La tercera parte, que está disponible en la página web de la CEPAL (www.cepal.org), contiene las notas referentes al desempeño económico de los países de América Latina y el Caribe en 2015 y el primer semestre de 2016, así como los respectivos anexos estadísticos. La información que se presenta ha sido actualizada al 30 de junio de 2016.

Economic Survey of Latin America and the Caribbean 2016: The 2030 Agenda for Sustainable Development and the challenges of financing for development

This, the sixty-eighth edition of the Economic Survey of Latin America and the Caribbean, which corresponds to the year 2016, consists of three parts. Part I outlines the region’s economic performance in 2015 and analyses trends in the first half of 2016, as well as the outlook for the rest of the year. It examines the external and internal factors influencing the region’s economic performance and highlights some of the macroeconomic policy challenges that have arisen in an external context of weak growth and high levels of uncertainty. Part II analyses the challenges that the countries of Latin America and the Caribbean face at the domestic and international levels in mobilizing financing for development. On the domestic front, slower growth and tighter fiscal restrictions pose significant challenges for the mobilization of resources. Externally, the classification of many of the region’s countries in the middle-income category limits their access to concessional external financing or international support. Part III of this publication may be accessed on the web page of the Economic Commission for Latin America and the Caribbean (www.eclac.org). It contains the notes relating to the economic performance of the countries of Latin America and the Caribbean in 2015 and the first half of 2016, together with their respective statistical annexes. The cut-off date for updating the statistical information in this publication was 30 June 2016.

Estudo Econômico da América Latina e do Caribe 2016: A Agenda 2030 para o Desenvolvimento Sustentável e os desafios do financiamento para o desenvolvimento. Documento informativo

Em sua edição número 68, que corresponde a 2016, o Estudo Econômico da América Latina e do Caribe consta de três partes. A primeira resume o desempenho da economia regional em 2015 e analisa a evolução durante o primeiro semestre de 2016, bem como as perspectivas de crescimento para o ano. Examina os fatores externos e internos que incidiram no desempenho econômico da região e destaca alguns dos desafios para as políticas macroeconômicas num contexto externo caracterizado por baixo crescimento e elevados graus de incerteza. A seção temática deste estudo analisa os desafios que os países da América Latina e do Caribe enfrentam no âmbito interno e externo para mobilizar o financiamento para o desenvolvimento. No âmbito interno, a desaceleração do crescimento e as maiores restrições fiscais impõem importantes desafios à mobilização de recursos. No âmbito externo, a condição de países de renda média dificulta o acesso ao financiamento externo concessional ou à cooperação internacional. A terceira parte, que está disponível no site da CEPAL (www.cepal.org), contém as notas referentes ao desempenho econômico dos países da América Latina e do Caribe em 2015 e no primeiro semestre de 2016, bem como os respectivos anexos estatísticos. A informação apresentada foi atualizada em 30 de junho de 2016.

The risk premium for equity: implications for resource allocation, welfare and policy

Analysis of the equity premium puzzle has focused on private sector capital markets. The object of this paper is to consider the welfare and policy implications of each of the broad classes of explanations of the equity premium puzzle. As would be expected, the greater the deviation from the first-best outcome implied by a given explanation of the equity premium puzzle, the more interventionist are the implied policy conclusions. Nevertheless, even explanations of the equity premium puzzle consistent with a general consumption-based asset pricing model have important welfare and policy implications.

Measuring accounting disclosure in a period of complex changes : the case of Egypt

Significant changes in accounting disclosure are observed in periods of economic change such as those relating to emerging capital markets and programs of privatization. Measurement of the level of accounting disclosure should ideally be designed to capture the complexity of change in order to give insight and explanation to match the causes and consequences of change. This paper shows the added interpretive value in subdividing the disclosure checklist to reflect the requirements of national accounting regulations, the location of disclosure items in the annual report, and limitations on the availability of regulations in official translation to the local language. Defining targeted disclosure categories leads to significance testing of specific aspects of changes in accounting disclosure in the Egyptian capital market in the 1990s. Strong correlation of disclosure with the presence of majority government ownership of the company and the relative activity of share trading supports the applicability of political costs and capital need theories, respectively. The relation between International Accounting Standards (IASs) disclosure and the type of audit firm points to additional theoretical explanations, including relative familiarity with the legislation and compliance features identifiable with the emerging capital market. The approach described in this paper has the potential for enhancing understanding of the complexity of accounting change in other emerging capital markets and developing economies.

International handbook on privatization

Privatization has dominated industrial restructuring programs since the 1980s and continues to do so. This authoritative and accessible Handbook considers all aspects of this key issue, including the theory of privatization; privatization in transition, developed and developing economics; as well the economic regulation of privatized industries. The studies in this volume, introduced by international experts in the field 'presents evidence of the scope and effects of privatization, and consequently provide the basis for improving both policy formulation and implementation. However, they also emphasize that privatization is not an end in itself. It is argued that for privatization to be worthwhile and for lasting economic efficiency gains to be achieved, supporting reforms must accompany most privatization programs, particularly in the arenas of corporate governance and capital markets, product market competition, and state regulatory processes. Furthermore, several contributions demonstrate that the degree to which ownership and market liberalization can be usefully separated, and whether privatization without either competition or effective regulation is worthwhile, remain controversial issues. Furnishing the reader with a comprehensive and lively discussion of privatization in theory and practice, this Handbook will be the essential source of information for researchers in the field, and for a wide-ranging audience including public policy makers and specialists, development experts and agencies, international banks, public policy and regulation economists, and management consultants.