We consider the drivers and implications of the growth of "BigTech" in finance – ie the financial services offerings of technology companies with established presence in the market for digital services. BigTech firms often start with payments. Thereafter, some expand into the provision of credit, insurance and money management products, either directly or in cooperation with financial institution partners. Focusing on credit, we show that BigTech firms lend more in countries with less competitive banking sectors and less stringent bank regulation. Analysing the case of Argentina, we find support for the hypothesis that BigTech lenders, by acquiring a vast amount of non-traditional information, have an advantage in credit assessment relative to a traditional credit bureau. They also serve unbanked borrowers, and may have an advantage in contact enforcement. It is too early to judge the extent of BigTech’s eventual advance into the provision of financial services. However, the early evidence allows us to pose pertinent questions that bear on their impact on financial stability and overall economic welfare.
China's bond market is destined to play an increasingly important role, both at home and abroad. And the inclusion of the country's bonds in global indexes will be a milestone for its financial market integration, bringing big opportunities as well as challenges for policymakers and investors alike. This calls for a good understanding of China's bond market structure, its unique characteristics, and areas where reforms are needed. This volume comprehensively analyzes the different segments of China's bond market, from sovereign, policy bank, and credit bonds, to the rapidly growing local government bond market. It also covers bond futures, green bonds, and asset-backed securities, as well as China's offshore market, which has played a major role in onshore market development.
Countries with large debts stocks are vulnerable to the vagaries of the markets. Confidence crises can arise out of nowhere, constricting access to the markets. Hence, the question arises as to whether these countries should put in place mechanisms that will help them better prepare for the possibility of crisis. In effect, the choice is whether to buy insurance. The cost of buying such insurance is that the possibility that markets will see the sovereign’s proactive steps to protect against a crisis not as an indication of prudent governance but rather as an indicator that a crisis is imminent. In this article, we use the case of a hypothetical euro area country (Italy) with a large debt stock and a known vulnerability to confidence crises to set forth its options, as of 2019, to anticipate a possible future debt restructuring. It can: do nothing, do a little; and do something substantial.
Desde principios del 2000, muchos países latinoamericanos alcanzaron un notable crecimiento económico acompañado de la reducción de la pobreza y la desigualdad, debido en gran parte a la persistente aplicación del patrón secular de exportación de materias primas. El fin del superciclo de los precios de los las materias primas en 2014 puso en riesgo algunas de estas ganancias en materia de desarrollo, lo que aumentó la ansiedad entre las clases medias emergentes, temerosas de regresar a la pobreza. Los líderes de América Latina, basándose en un rico legado intelectual, han diseñado enfoques novedosos en la búsqueda del desarrollo sostenible. Las narrativas sobre desarrollo alternativo presentadas por los gobiernos de izquierda han puesto énfasis en nociones como el «buen vivir», posiblemente la propuesta más influyente y revolucionaria originada en la región desde las diferentes variantes de la teoría de la dependencia. Menos claro es hasta qué punto las ideologías y las narrativas en competencia se han traducido en resultados divergentes, ya sea respecto al (neo)extractivismo, la sostenibilidad ecológica o los derechos y la identidad cultural de los pueblos indígenas, o sencillamente en términos de diversificación económica. Este capítulo introduce el número temático de International Development Policy que aborda las innovaciones paradigmáticas y las experiencias de desarrollo recientes en América Latina, con un interés particular en la región andina.
Since the early 2000s, many Latin American countries achieved remarkable economic growth coupled with poverty and inequality reduction, largely due to the pursuit of a centuries-old pattern of commodity exports. The end of the commodity price super-cycle in 2014 puts some of these development gains in jeopardy, raising anxiety among emerging middle classes wary of slipping back into poverty. Drawing on a rich intellectual heritage, Latin American leaders have designed novel approaches in the pursuit of sustainable development. Alternative development narratives brought to the fore by left-wing governments have emphasised notions such as buen vivir1, arguably the most influential and revolutionary proposition originated in the region since different variants of the dependency theory. What is less clear is the extent to which competing ideologies and narratives have translated into diverging outcomes, be it with regard to (neo-) extractivism, ecological sustainability or the rights and cultural identity of indigenous peoples, or simply in terms of economic diversification. This chapter introduces the thematic issue of International Development Policy, which deals with recent paradigmatic innovations and development experiences in Latin America, with a particular focus on the Andean region.
The Swiss Federal government finances are in an excellent shape: debt is small (and decreasing), and carries a low interest rate. This paper reviews the prospects for the Swiss finances drawing on the recent literature. We argue that the current policy of running surpluses and paying down the debt is inefficient, and propose three alternatives. First, as the interest rate on the debt is much lower than the GDP growth rate – a pattern that is not unusual – Switzerland could stabilize the debt to GDP ratio and run a primary deficit of abut CHF 2.6 billion (0.37% of GDP). Second, the low cost of debt implies that investments in education and infrastructure are more attractive than in the past. Third, Switzerland could use its implicit asset (the trust of investors) and set up a sovereign wealth fund financed by government debt. We estimate that a fund amounting to 10% of GDP could generate an annual revenue between CHF 0.7 to 2 billion (0.1% to 0.3% of GDP), though these estimates could be refined further.
We study an overlooked episode of financial development in England during the 17th century. We construct a novel, annual series of interest rates paid by the Corporation of London. We show that: interest rates declined by 350 basis points; Interest rates co-moved with Amsterdam: we attribute half of this decline to the integration of the capital markets of London and Amsterdam and half to the increase in London’s financial market liquidity. The reduction of the usury rate lowered interest rates by 50 basis points in the 1650s. England’s financial evolution and path towards modern growth date, therefore, to the 17th century.
The online trading platform Alibaba provides financial technology (FinTech) credit for millions of micro, small, and medium enterprises (MSMEs). Using an internal credit score threshold that governs the allocation of credit, we apply a Fuzzy Regression Discontinuity Design (RDD) to explore the causal effect of credit access on firm volatility. We find that credit access significantly reduces firm sales volatility and that the effect is strongly countercyclical. We also find that the negative effect on firm volatility is concentrated in firms that are in regions with lower economic growth and poorer legal environment and contract enforcement, and that are in more competitive industries. We further use natural hazards as an exogenous shock and find that firms with access to FinTech credit are more resilient to external shocks. Overall, our findings contribute to a better understanding of the role of FinTech credit in MSMEs.
We examine the relationship between environmental regulation and spatial development in China. Exploiting changes in national pollution standards for three industries, ammonia, paper and cement, we measure the impact of environmental regulation on industry productivity. Our results suggest that national pollution standards do not affect industry productivity, but they reallocate productivity spatially. We show that regulated industries located in developing cities increase their productivity compared to similar industries in other cities. This means that environmental regulation affects the spatial distribution of technology in China and might influence long‐term spatial development by reducing geographical disparities.
