States have traditionally offered support to their fiscally distressed municipalities. When less intrusive forms of assistance fail to bring stability, some states employ supervisory institutions that exercise approval authority over local budgets or, more intrusively, that displace locally elected officials. These "takeover boards" are frequently accused of representing an antidemocratic form of local government and a denial of local autonomy.In this Article, I suggest that the extent to which takeover boards are subject to an anti-democratic critique is frequently overstated. Efforts to revive near-insolvent localities cannot be oblivious to the causes that generated their distress. Depopulation, high unemployment, depleted municipal services, and blight do not arise spontaneously. They are frequently the consequence of long periods of local mismanagement, in which expenditures deviate substantially from those goods and services that residents prefer, inducing the most mobile among them to gravitate to more hospitable jurisdictions. Any viable response must therefore address the causes of political dysfunction. I contend that by addressing the political underpinnings of fiscal distress, takeover boards may be more capable of satisfying the interests of local residents for public goods than local elected officials, and may also represent the interests of nonresidents and creditors who are not considered by those officials. Moreover, I suggest, the authority of takeover boards should be expanded to allow them to engage in restructuring of municipal governance in order to avoid the entrenched and defragmented institutions that are often associated with local fiscal distress. The temporary nature of takeover board jurisdiction means that when local governance returns to the realm of normal politics, residents will be in a more informed position to evaluate the optimal structure of local governance.
{"title":"Dictatorships for Democracy: Takeovers of Financially Failed Cities","authors":"C. Gillette","doi":"10.2139/ssrn.2397533","DOIUrl":"https://doi.org/10.2139/ssrn.2397533","url":null,"abstract":"States have traditionally offered support to their fiscally distressed municipalities. When less intrusive forms of assistance fail to bring stability, some states employ supervisory institutions that exercise approval authority over local budgets or, more intrusively, that displace locally elected officials. These \"takeover boards\" are frequently accused of representing an antidemocratic form of local government and a denial of local autonomy.In this Article, I suggest that the extent to which takeover boards are subject to an anti-democratic critique is frequently overstated. Efforts to revive near-insolvent localities cannot be oblivious to the causes that generated their distress. Depopulation, high unemployment, depleted municipal services, and blight do not arise spontaneously. They are frequently the consequence of long periods of local mismanagement, in which expenditures deviate substantially from those goods and services that residents prefer, inducing the most mobile among them to gravitate to more hospitable jurisdictions. Any viable response must therefore address the causes of political dysfunction. I contend that by addressing the political underpinnings of fiscal distress, takeover boards may be more capable of satisfying the interests of local residents for public goods than local elected officials, and may also represent the interests of nonresidents and creditors who are not considered by those officials. Moreover, I suggest, the authority of takeover boards should be expanded to allow them to engage in restructuring of municipal governance in order to avoid the entrenched and defragmented institutions that are often associated with local fiscal distress. The temporary nature of takeover board jurisdiction means that when local governance returns to the realm of normal politics, residents will be in a more informed position to evaluate the optimal structure of local governance.","PeriodicalId":366245,"journal":{"name":"PSN: Debt Crises (Topic)","volume":"38 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115835942","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2013-11-01DOI: 10.5089/9781475552874.001.A001
Carmen M. Reinhart, Kenneth Rogoff
Even after one of the most severe multi-year crises on record in the advanced economies, the received wisdom in policy circles clings to the notion that high-income countries are completely different from their emerging market counterparts. The current phase of the official policy approach is predicated on the assumption that debt sustainability can be achieved through a mix of austerity, forbearance and growth. The claim is that advanced countries do not need to resort to the standard toolkit of emerging markets, including debt restructurings and conversions, higher inflation, capital controls and other forms of financial repression. As we document, this claim is at odds with the historical track record of most advanced economies, where debt restructuring or conversions, financial repression, and a tolerance for higher inflation, or a combination of these were an integral part of the resolution of significant past debt overhangs.
{"title":"Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten","authors":"Carmen M. Reinhart, Kenneth Rogoff","doi":"10.5089/9781475552874.001.A001","DOIUrl":"https://doi.org/10.5089/9781475552874.001.A001","url":null,"abstract":"Even after one of the most severe multi-year crises on record in the advanced economies, the received wisdom in policy circles clings to the notion that high-income countries are completely different from their emerging market counterparts. The current phase of the official policy approach is predicated on the assumption that debt sustainability can be achieved through a mix of austerity, forbearance and growth. The claim is that advanced countries do not need to resort to the standard toolkit of emerging markets, including debt restructurings and conversions, higher inflation, capital controls and other forms of financial repression. As we document, this claim is at odds with the historical track record of most advanced economies, where debt restructuring or conversions, financial repression, and a tolerance for higher inflation, or a combination of these were an integral part of the resolution of significant past debt overhangs.","PeriodicalId":366245,"journal":{"name":"PSN: Debt Crises (Topic)","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132164067","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Central government bailouts of local governments are commonly viewed as a recipe for local fiscal indiscipline, as local governments learn that the center will come to rescue in times of trouble. Little is however known about whether such tendencies can be dampened if assistance is made conditional upon the local governments' own fiscal efforts. We examine a case in which the Swedish central government provided conditional grants to 36 financially troubled municipalities: to receive the grant, municipalities first had to cut costs and balance their budgets. For each municipality, we estimate the long run program effect on per capita costs of services using the synthetic control method for case studies (Abadie and Gardeazabal, 2003; Abadie et al., 2010). The number of municipalities that substantially reduce their costs after the program is much larger than the number that substantially increase their costs, and there is a cost reducing effect on average. Fixed effects estimations with net revenues as measure of fiscal performance corroborate these findings for costs. Conditional bailouts need thus not erode fiscal responsibility and may even induce fiscal discipline. (Less)
中央政府对地方政府的救助通常被视为地方财政不守纪律的良方，因为地方政府知道，中央政府会在困难时期出手相救。然而，如果援助以地方政府自身的财政努力为条件，这种趋势是否会受到抑制，我们知之甚少。我们研究了瑞典中央政府向36个财政困难的城市提供有条件赠款的案例:为了获得赠款，城市首先必须削减成本并平衡预算。对于每个城市，我们使用案例研究的综合控制方法估计了长期计划对人均服务成本的影响(Abadie和Gardeazabal, 2003;Abadie et al.， 2010)。在项目实施后大幅降低成本的市政当局数量远远大于大幅增加成本的市政当局数量，并且平均而言存在成本降低效应。以净收入作为财政绩效衡量标准的固定效应估计证实了这些关于成本的发现。因此，有条件的救助不需要削弱财政责任，甚至可能引发财政纪律。(少)
{"title":"Assist or Desist? Conditional Bailouts and Fiscal Discipline in Local Governments","authors":"J. Dietrichson, L. Ellegård","doi":"10.2139/ssrn.2440627","DOIUrl":"https://doi.org/10.2139/ssrn.2440627","url":null,"abstract":"Central government bailouts of local governments are commonly viewed as a recipe for local fiscal indiscipline, as local governments learn that the center will come to rescue in times of trouble. Little is however known about whether such tendencies can be dampened if assistance is made conditional upon the local governments' own fiscal efforts. We examine a case in which the Swedish central government provided conditional grants to 36 financially troubled municipalities: to receive the grant, municipalities first had to cut costs and balance their budgets. For each municipality, we estimate the long run program effect on per capita costs of services using the synthetic control method for case studies (Abadie and Gardeazabal, 2003; Abadie et al., 2010). The number of municipalities that substantially reduce their costs after the program is much larger than the number that substantially increase their costs, and there is a cost reducing effect on average. Fixed effects estimations with net revenues as measure of fiscal performance corroborate these findings for costs. Conditional bailouts need thus not erode fiscal responsibility and may even induce fiscal discipline. (Less)","PeriodicalId":366245,"journal":{"name":"PSN: Debt Crises (Topic)","volume":"28 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-10-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123794849","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article describes the current sovereign debt crisis of Greece, Ireland, Portugal and Spain, (GIPS). Using data from the International Monetary Fund, IMF, we illustrate the degree of the problem since the start of 2009. Macroeconomic indicators such as gross domestic product constant prices as percent change, general government net lending/borrowing as percent of GDP, general government net debt as a percent of GDP, unemployment rate, general government revenue as percent of GDP, general government total expenditure as percent of GDP, current account balance as percent of GDP, inflation end of period consumer prices as percent change, total investment as percent of GDP, gross national savings as percent of GDP, volume of imports of goods and services as percent change, volume of exports of goods and services as percent change would be used to show the violations from the Maastricht Treaty which was signed in 1992. The biggest problem was that the Treaty signed without taking into consideration the Greek Orthodox approach. This was the biggest mistake that resulted to magnify the debt and deficit among the EU countries. If there is no blessing from the Orthodox Church, then the decisions and the project will not be sustainable and successful for a long – period of time.
{"title":"The European Debt Crisis. An Analysis and Evidence From the Macroeconomic Variables of the EU Members","authors":"Michel Guirguis","doi":"10.2139/ssrn.3253650","DOIUrl":"https://doi.org/10.2139/ssrn.3253650","url":null,"abstract":"This article describes the current sovereign debt crisis of Greece, Ireland, Portugal and Spain, (GIPS). Using data from the International Monetary Fund, IMF, we illustrate the degree of the problem since the start of 2009. Macroeconomic indicators such as gross domestic product constant prices as percent change, general government net lending/borrowing as percent of GDP, general government net debt as a percent of GDP, unemployment rate, general government revenue as percent of GDP, general government total expenditure as percent of GDP, current account balance as percent of GDP, inflation end of period consumer prices as percent change, total investment as percent of GDP, gross national savings as percent of GDP, volume of imports of goods and services as percent change, volume of exports of goods and services as percent change would be used to show the violations from the Maastricht Treaty which was signed in 1992. The biggest problem was that the Treaty signed without taking into consideration the Greek Orthodox approach. This was the biggest mistake that resulted to magnify the debt and deficit among the EU countries. If there is no blessing from the Orthodox Church, then the decisions and the project will not be sustainable and successful for a long – period of time.","PeriodicalId":366245,"journal":{"name":"PSN: Debt Crises (Topic)","volume":"70 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-08-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128808760","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study investigates the European foreign exchange markets efficiency from both the within- and across-country perspectives and subsequently compared them across several recent crises. The European foreign exchange markets are generally efficient over the whole sample period. From the subsample periods analysis, September 11, 2001 event is shown to be the most disturbing event among recent crises. Surprisingly, there is little evidence of disturbance to foreign markets efficiency during the two most recent major crises namely the global financial crisis of 2008/09 and the current European Sovereign Debt Crisis (ESDC). The forward bias puzzle remains a more prominent phenomenon among the advanced countries' currencies than their developing counterparts. There is also evidence showing the convergence in the efficiency condition between the European advanced and developing countries‟ currencies in the later subsample periods. There are three key contributions; one, we have updated the literature until the recent ESDC; two, our results provide comfort to policymakers that the European foreign exchange markets efficiency is least affected by the recent crises; and three, our conclusions support the notion of market efficiency in the long run.
{"title":"Foreign Exchange Markets Efficiency Under Recent Crises: Evidence from the European Markets","authors":"Y. Wong, R. Ahmad","doi":"10.2139/ssrn.2283809","DOIUrl":"https://doi.org/10.2139/ssrn.2283809","url":null,"abstract":"This study investigates the European foreign exchange markets efficiency from both the within- and across-country perspectives and subsequently compared them across several recent crises. The European foreign exchange markets are generally efficient over the whole sample period. From the subsample periods analysis, September 11, 2001 event is shown to be the most disturbing event among recent crises. Surprisingly, there is little evidence of disturbance to foreign markets efficiency during the two most recent major crises namely the global financial crisis of 2008/09 and the current European Sovereign Debt Crisis (ESDC). The forward bias puzzle remains a more prominent phenomenon among the advanced countries' currencies than their developing counterparts. There is also evidence showing the convergence in the efficiency condition between the European advanced and developing countries‟ currencies in the later subsample periods. There are three key contributions; one, we have updated the literature until the recent ESDC; two, our results provide comfort to policymakers that the European foreign exchange markets efficiency is least affected by the recent crises; and three, our conclusions support the notion of market efficiency in the long run.","PeriodicalId":366245,"journal":{"name":"PSN: Debt Crises (Topic)","volume":"107 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-06-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125037709","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This policy paper aims at presenting the key facts related to the Euro sovereign debt crisis that occurred in the interval 2010-2012. It points out some main coordination failures that are at the origin of the crisis, and comments on the effectiveness of various stabilization measures undertook by governments and the EU institutions.
{"title":"The Euro Sovereign Debt Crisis and the Built-In Instability of the Euro","authors":"R. Vranceanu","doi":"10.2139/ssrn.2253823","DOIUrl":"https://doi.org/10.2139/ssrn.2253823","url":null,"abstract":"This policy paper aims at presenting the key facts related to the Euro sovereign debt crisis that occurred in the interval 2010-2012. It points out some main coordination failures that are at the origin of the crisis, and comments on the effectiveness of various stabilization measures undertook by governments and the EU institutions.","PeriodicalId":366245,"journal":{"name":"PSN: Debt Crises (Topic)","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128615264","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Using an unexpected state-owned-enterprise bond default in 2020 and a difference-in-difference method, we identify the size of implicit government guarantee in the corporate bond market of China. We find that the local government fiscal burden is the source of the implicit government guarantee. The default event has uneven impacts on different regions through the fiscal burden channel.
{"title":"The Implicit Government Guarantee: Evidence from an Unexpected Corporate Bond Default Event","authors":"Ying Lei, Ei Yang, Yue Yin","doi":"10.2139/ssrn.3935586","DOIUrl":"https://doi.org/10.2139/ssrn.3935586","url":null,"abstract":"Using an unexpected state-owned-enterprise bond default in 2020 and a difference-in-difference method, we identify the size of implicit government guarantee in the corporate bond market of China. We find that the local government fiscal burden is the source of the implicit government guarantee. The default event has uneven impacts on different regions through the fiscal burden channel.","PeriodicalId":366245,"journal":{"name":"PSN: Debt Crises (Topic)","volume":"173 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114641186","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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