Enisse Kharroubi and Luiz A. Pereira da Silva
This chapter explores the interrelationships between financial reforms, financial development, and structural change. More specifically, it considers the impact of financial reform on changes in labour productivity and whether liberalizing the functioning of the financial sector and lifting a number of regulations through financial reforms affect structural change and growth. In this chapter, structural change is defined as the contribution of labour reallocation across sectors to aggregate productivity growth and the difference-in-difference methodology is used to compare the evolution of productivity growth—and its different sources including structural change—before and after a financial reform. This evolution is also contrasted with cases in which financial reform is absent. Drawing on a sample of advanced and emerging market economies, the chapter shows that labour productivity accelerates following periods of intense financial reforms. The results generally suggest that financial reforms positively affect productivity growth, in part through the contribution of structural change.
Infrastructure Finance: Mobilizing Long-Term Liability Embedded Funds from International Institutional Investors to Emerging Markets
Kevin Lu and Cledan Mandri-Perrott
This chapter examines the current investment gap in the emerging market and developing economy (EMDE) infrastructure market and proposes innovative solutions to help close the gap and supplement local financing by mobilizing international financial sources to support EMDE projects. The chapter highlights the importance of treating EMDE infrastructure as an asset class and the associated implications to investors, regulators, project sponsors, and other stakeholders. Specific products include project asset-based securities, puttable bonds, programmatic risk guarantees, and securitized infrastructure loan products. The chapter explores potential investor targets for the emerging market infrastructure sector and lays out proposed structures for alternative financing products that engage commercial and multilateral development banks to mobilize additional finance.
Liquidity Swaps between Central Banks, the IMF, and the Evolution of the International Financial Architecture
Pauline Bourgeon and Jérôme Sgard
The 9/11 terrorist attacks in New York, then the 2008 crisis and the euro crisis have seen a major monetary innovation in the form of large-scale exchanges of liquidity swaps between core central banks. For instance, the US Federal Reserve and the European Central Bank exchanged for a few days or weeks equivalent amounts of their respective currencies, so that the ECB could lend dollars to eurozone commercial banks, and vice versa. At maturity, the swaps were either extended over time or reimbursed. This utterly simple operation thus allows central banks to act collectively as a Fed-led, network-based international lender of last resort. A significant corollary is that the action of the IMF, which used to be the main international crisis manager, now extends only to the developing countries and the (smaller) emerging countries. Conditionality, with its strongly asymmetric dimension, is limited to this latter group, while unconditional swaps are now the key liquidity channel for supporting the rich and powerful countries.