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The Prudential Regulation of Financial Institutions: Why Regulatory Responses to the Crisis Might Not Prove Sufficient

April 2, 2014 Comments off

The Prudential Regulation of Financial Institutions: Why Regulatory Responses to the Crisis Might Not Prove Sufficient
Source: Organisation for Economic Co-operation and Development

It is now six years since a devastating financial and economic crisis rocked the global economy. Supported strongly by the G20 process, international regulators led by the Financial Stability Board have been working hard ever since to develop new regulatory standards designed to prevent a recurrence of these events. These international standards are intended to provide guidance for the drawing up of national legislation and regulation, and have already had a pervasive influence around the world. This paper surveys recent international developments concerning the prudential regulation of financial institutions: banks, the shadow banking system and insurance companies. It concludes that, while substantial progress has been made, the global economy nevertheless remains vulnerable to possible future financial instability. This possibility reflects three sets of concerns. First, measures taken to manage the crisis to date have actually made the prevention of future crises more difficult. Second, the continuing active debate over virtually every aspect of the new regulatory guidelines indicates that the analytical foundations of what is being proposed remain highly contestable. Third, implementation of the new proposals could suffer from different practices across regions. Looking forward, the financial sector will undoubtedly continue to innovate in response to competitive pressures and in an attempt to circumvent whatever regulations do come into effect. If we view the financial sector as a complex adaptive system, continuous innovation would only be expected. This perspective also provides a number of insights as to how regulators should respond in turn. Not least, it suggests that attempts to reduce complexity would not be misguided and that complex behavior need not necessarily be accompanied by still more complex regulation. Removing impediments to more effective self-discipline and market discipline in the financial sector would also seem recommended.

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Sovereign borrowing set to fall in 2014, says OECD

April 1, 2014 Comments off

Sovereign borrowing set to fall in 2014, says OECD
Source: Organisation for Economic Co-operation and Development
From press release:

Borrowing operations by OECD governments are set to decrease, as their borrowing needs continue to decline, according to a new OECD report. Net borrowing needs are projected to fall from USD 2.0 trillion in 2013 to USD 1.5 trillion in 2014, the lowest level since 2007.

The Sovereign Borrowing Outlook 2014 estimates that gross borrowing requirements will total USD 10.6 trillion in 2014, down from USD 10.8 trillion in 2013.

The redemption profile of medium- and long-term central government debt in the OECD area remains challenging, according to the Outlook, with large projected payment flows for the G7 and euro area governments for 2013 and 2014. For the OECD area as a whole, governments will need to refinance close to 29 % of its outstanding long-term debt in the next 3 years.

PISA 2012 Results: Creative Problem Solving: Students’ skills in tackling real-life problems (Volume V)

April 1, 2014 Comments off

PISA 2012 Results: Creative Problem Solving: Students’ skills in tackling real-life problems (Volume V)
Source: Organisation for Economic Co-operation and Development

This fifth volume of PISA 2012 results presents an assessment of student performance in creative problem solving, which measures students’ capacity to respond to non-routine situations in order to achieve their potential as constructive and reflective citizens. It provides the rationale for assessing problem-solving skills and describes performance within and across the 44 countries and economies that took part in the assessment. In addition, the volume highlights the relative strengths and weaknesses of each school system and examines how they are related to individual student characteristics, such as gender, immigrant background and socio-economic status. The volume also explores the role of education in fostering problem-solving skills.

OECD Forecasts During and After the Financial Crisis: A Post Mortem

March 25, 2014 Comments off

OECD Forecasts During and After the Financial Crisis: A Post Mortem
Source: Organisation for Economic Co-operation and Development

This paper assesses the OECD’s projections for GDP growth and inflation during the global financial crisis and recovery, focussing on lessons that can be learned. The projections repeatedly over-estimated growth, failing to anticipate the extent of the slowdown and later the weak pace of the recovery – errors made by many other forecasters. At the same time, inflation was stronger than expected on average. Analysis of the growth errors shows that the OECD projections in the crisis years were larger in countries with more international trade openness and greater presence of foreign banks. In the recovery, there is little evidence that an underestimate of the impact of fiscal consolidation contributed significantly to forecast errors. Instead, the repeated conditioning assumption that the euro area crisis would stabilise or ease played an important role, with growth weaker than projected in European countries where bond spreads were higher than had been assumed. But placing these errors in a historical context illustrates that the errors were not without precedent: similar-sized errors were made in the first oil price shock of the 1970s. In response to the challenges encountered in forecasting in recent years and the lessons learnt, the OECD and other international organisations have sought to improve their forecasting techniques and procedures, to improve their ability to monitor near-term developments and to better account for international linkages and financial market developments.

OECD — Society at a Glance 2014

March 21, 2014 Comments off

Society at a Glance 2014
Source: Organisation for Economic Co-operation and Development

Society at a Glance 2014 takes stock of available information about the social challenges emerging since the beginning of the economic crisis, and countries’ policy responses to meet those challenges.

This seventh edition shows that despite an improving global economy, the squeeze on public spending in many countries will make it increasingly difficult to cope with the social challenges thrown up by the crisis.

Mental health and work: United Kingdom

March 7, 2014 Comments off

Mental health and work: United Kingdom
Source: Organisation for Economic Co-operation and Development

Awareness of the importance of mental health at work in the UK is among the highest in the world. However, a number of challenges remain to help people with mental health problems stay in work and facilitate their early return to work. The UK has put in place and is putting in place a number of very important reforms. It will be important to implement those reforms rigorously; to modify and strengthen the reforms that have not yet delivered and to close the remaining gaps identified in the report.

Conflict and fragility: Resource flows and trends in fragile states

March 6, 2014 Comments off

Conflict and fragility: Resource flows and trends in fragile states
Source: Organisation for Economic Co-operation and Development

Fragile States 2014: Domestic Revenue Mobilisation is the latest in a series of annual publications on resource flows to fragile states produced by the OECD Development Assistance Committee (DAC) through the International Network on Conflict and Fragility (INCAF) since 2006.

Fragile States 2014: Domestic Revenue Mobilisation
Aid has declined by 2.4% in 2011 and will continue its downward trend. Meanwhile, the share of the world’s poor found in fragile states is set to rise to a half by 2018; of the seven countries that are unlikely to meet a single MDG, six are fragile.

The report reveals that aid remains the largest source of development finance for fragile least-developed countries, while remittances from migrants have outpaced aid in other fragile states. Those transfers could be used better to finance development; this report provides insights on how to do this.

The report also finds that fragile states still only collect 14% of their GDP in taxes on average, well below the 20% UN benchmark viewed as the minimum needed to meet development goals. Yet a mere 0.07% of official development assistance (ODA) to fragile states is directed towards building accountable tax systems. The report therefore asks how donors can use their aid to support fragile states in mobilising more domestic revenue, and provides many recent country examples.

Dividing the Pie in Brazil: Income Distribution, Social Policies and the New Middle Class

January 28, 2014 Comments off

Dividing the Pie in Brazil: Income Distribution, Social Policies and the New Middle Class
Source: Organisation for Economic Co-operation and Development

Brazil has made remarkable progress in reducing poverty and inequality. This reduction is explained by strong growth but also by effective social policies. Besides growth, public services and cash transfers have played the biggest role, the latter notably through the successful “Bolsa Familia” programme. Among public services, improved access to education has played a major role, allowing more Brazilians to move into better-paid jobs. However, shortages in physical school infrastructure are limiting the hours of instruction that students receive. The high drop-out rate needs to be reduced through early interventions such as expanding early-childhood education, by reducing grade-repetition and through more tailored support for those at risk. The quality of teaching could also be raised through more in-service teacher training and stronger performance incentives for teachers. Performance of public services devoted to health and transports has been mixed. Public health services are widely available but suffer from underfunding and training places for medical staff need to be expanded. The public urban transport system suffers from a shortage of investment which is urgently needed to upgrade capacity. Regarding cash transfers, the success of “Bolsa Familia” and new programmes put in place under the umbrella of the “Brasil sem Miseria” programme is remarkable but transfer payments remain too heavily focused on pension benefits. Giving more priority to “Bolsa Familia” and “Brasil sem Miseria” while limiting the real growth of pension expenditures in the future would improve the effectiveness of social expenditures for reducing poverty and inequality.

Fairly Sharing the Social Impact of the Crisis in Greece

January 27, 2014 Comments off

Fairly Sharing the Social Impact of the Crisis in Greece
Source: Organisation for Economic Co-operation and Development

Poverty and income inequality have worsened since the onset of the crisis. While the design of fiscal measures has mitigated the burden sharing of fiscal adjustment, as the recession has deepened unemployment has risen, earnings have declined and social tensions have increased. Getting people back to work and supporting the most vulnerable remain priorities for inclusive growth and distributing the costs of adjustment equitably. Within the limited fiscal space this calls for continued reforms in targeting social support, especially housing benefits, extending unemployment insurance and introducing a means-tested minimum income. Sustaining universal access to good health care is also essential. Well-designed activation policies are important to bring the unemployed, especially the young, to work. At the same time, it is important to strengthen the effectiveness of the labour inspection to ensure full enforcement of the labour code. Decisive steps to contain tax evasion are also critical to social fairness. Reforms by the government in many of these areas are welcome and need to continue.

New Indicators of Competition Law and Policy in 2013 for OECD and non-OECD Countries

January 20, 2014 Comments off

New Indicators of Competition Law and Policy in 2013 for OECD and non-OECD Countries
Source: Organisation for Economic Co-operation and Development

This paper presents the new OECD competition law and policies (CLP) indicators which measure the strength and scope of competition regimes in 49 jurisdictions (OECD and non-OECD). The indicators cover areas for which there is a broad consensus among member countries on what constitutes ‘good’ practice for competition regimes. The results suggest that competition regimes are broadly similar across countries in these areas because most countries have adopted all or a large number of the ‘good’ policy settings captured by the indicators. On average, the design of competition laws and policies appears to be closer to best practice in OECD countries than in non-OECD countries. Jurisdictions differ relatively more on the enforcement of competition law than on the competition law itself.

OECD Review of Fisheries: Country Statistics 2013

January 13, 2014 Comments off

OECD Review of Fisheries: Country Statistics 2013
Source: Organisation for Economic Co-operation and Development

Fisheries (capture fisheries and aquaculture) supply the world each year with millions of tonnes of fish (including, notably, fish, molluscs and crustaceans). Fisheries as well as ancillary activities also provide livelihoods and income. The fishery sector contributes to development and growth in many countries, playing an important role for food security, poverty reduction, employment and trade.

This publication contains statistics on fisheries from 2005 to 2012. Data provided concern fishing fleet capacity, employment in fisheries, fish landings, aquaculture production, recreational fisheries, government financial transfers, and imports and exports of fish.

OECD countries covered

Australia, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States

Non-member economies covered

Argentina, Chinese Taipei, Thailand

The State of the Banking Sector in Europe

January 8, 2014 Comments off

The State of the Banking Sector in Europe
Source: Organisation for Economic Co-operation and Development

This paper reviews the state of the banking sector in Europe. At the aggregate level, the empirical data suggest that the Baltics, Cyprus, Greece and Ireland, in particular, are hit by a strong decline in lending in the wake of the financial crisis. This deleveraging is mainly caused by a reduction in cross-border supply of credit. We also examine the capital position of the European banking system, using November 2013 stock market data. In the basic scenario to restore capital to a market based leverage ratio of 3%, EUR 84 billion of extra capital would be needed for the largest 60 banks.

At the bank level, the top tertile of well-capitalised banks (with a market based leverage ratio well above 4%) continues lending. By contrast, the 2nd tertile of medium-capitalised banks (between 3 and 4%) and the 3rd tertile of weakly capitalised banks (well below 3%) show a strong decline in lending. Moreover, the market-to-book ratio is below one for these banks. The market thus gives a lower value to these banks.

Our findings provide prima facie evidence of a credit crunch in Europe. Another fallout of the financial crisis is an increase, though very modest, of concentration in banking in the distressed countries (Greece, Ireland, Portugal, Spain and Italy). The enhancement of financial stability through (forced) M&As seems to come at the expense of reduced competition.

New Econometric Estimates of Long-term Growth Effects of Different Areas of Public Spending

December 30, 2013 Comments off

New Econometric Estimates of Long-term Growth Effects of Different Areas of Public Spending
Source: Organisation for Economic Co-operation and Development

Using panel data for OECD countries, this study investigates the extent to which changes in government spending on education, health and other areas influence long-term growth. The results suggest that, if total government spending is kept unchanged, increasing expenditure on health, education and transport raises long-term GDP growth. In contrast, government spending on housing is found to weaken long-term GDP growth. The error-correction specification used allows assessing adjustment speed which, consistent with intuition, is estimated to be slow. According to the econometric results, it takes more than five years for half of the effect of a change in the structure of government spending to be reflected in longterm growth.

Cycling, Health and Safety

December 24, 2013 Comments off

Cycling, Health and Safety
Source: Organisation for Economic Co-operation and Development

Many jurisdictions around the world are trying to retain or increase the share of cycling in urban traffic in order to benefit from the many health and transport efficiency benefits. Safety is a key concern and should be accounted for in these policies.

This report of the International Transport Forum’s Cycling Safety Working Group monitors international trends in cycling, safety and policy, and explores options that may help decision makers design safe environments for cycling. Key messages relate to strategic goal-setting for cycling policy and managing crash risks while increasing health benefits. The report also discusses how to better capture crash and bicycle usage statistics. The safety impacts of a wide range of pro-cycling measures are examined in detail.

Informal Employment in Russia: Definitions, Incidence, Determinants and Labour Market Segmentation

December 23, 2013 Comments off

Informal Employment in Russia: Definitions, Incidence, Determinants and Labour Market Segmentation
Source: Organisation for Economic Co-operation and Development

This paper takes stock of informal employment in Russia analysing its incidence and determinants. Using the regular 2003-11 waves and an informality supplement of the Russian Longitudinal Monitoring Survey (RLMS) it develops several measures of informal employment and demonstrates that the incidence varies widely across the different definitions. We also show that the determinants of informal employment are roughly stable across the different measures: workers who are males, relatively young, unskilled and employed in construction and trade and related services have a higher likelihood to have an informal job. We also take a look at the issue of labour market segmentation along the informal-formal divide by estimating an informal-formal wage gap at the means and across the entire wage distributions. We find only weak evidence for labour market segmentation in Russia when estimating an informal-formal wage gap for salaried workers at the mean. The results of quantile regressions show a wage penalty in the lower half of the distribution and no gap in the upper half for informal employees. In contrast, informal self-employed and entrepreneurs have conditional mean wages that are higher than the mean wages for the formally employed. Across the entire wage distribution, however, we find a negative wage gap in the lowest quartile and a strongly positive wage gap in the highest quartile, pointing to a segmented informal sector with a lower free entry tier and an upper rationed tier. This Working Paper relates to the 2014 OECD Economic Survey of the Russian Federation (www.oecd.org/eco/surveys/russia).

Major brake in health spending growth as governments cut budgets in the crisis, says OECD

November 21, 2013 Comments off

Major brake in health spending growth as governments cut budgets in the crisis, says OECD
Source: Organisation for Economic Co-operation and Development

Total health spending has fallen in one of three OECD countries between 2009 and 2011, with those hardest hit by the crisis most affected. This is a sharp reversal from the strong growth in the years prior to the crisis, according to a new OECD report.

Health at a Glance 2013 says that this makes it all the more important that countries make their healthcare systems more productive, efficient and affordable.

Spending per capita fell in 11 of 33 OECD countries between 2009 and 2011, notably by 11.1% in Greece and 6.6% in Ireland. Growth also slowed significantly in others, including Canada (0.8%) and the United States (1.3%).

Only Israel and Japan saw the rate of health spending growth accelerate since 2009 compared with the previous decade. Health spending in Korea has continued to grow at more than 6% per year since 2009 but more slowly than in previous years.

Governments have worked to lower spending through cutting prices of medical goods, especially pharmaceuticals, and by budget restrictions and wage cuts in hospitals.

CRS — The Organization for Economic Cooperation and Development

November 15, 2013 Comments off

The Organization for Economic Cooperation and Development (PDF)
Source: Congressional Research Service (via U.S. State Department Foreign Press Center)

The Organization for Economic Cooperation and Development (OECD) celebrated its 50th anniversary in 2011, a time when the global economy was struggling to recover from the financial crisis and slow economic growth. The OECD is an intergovernmental economic organization in which the 34 member countries discuss and develop key policy recommendations that often serve as the basis for international standards and practices. In addition, the OECD members analyze economic and social policy and share expertise and exchanges with more than 70 developing and emerging economies. The 34 member countries include Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, The Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom, and the United States. While all of the member countries are considered to be economically advanced and collectively produce 60% of the world’s goods and services, membership is limited only by a country’s commitment to a market economy and a pluralistic democracy. The OECD also has extended an invitation to the Russian Federation for membership, which includes meeting rigorous best practices relative to anti-bribery and anti-corruption standards. Furthermore, the OECD works with other potential partners such as Brazil, China, India, Indonesia, and South Africa with a view toward possible membership.

How’s life? 2013 Measuring well-being

November 7, 2013 Comments off

How’s life? 2013 Measuring well-being
Source: Organisation for Economic Co-operation and Development

Every person aspires to a good life. But what does “a good or a better life” mean? The second edition of How’s Life? paints a comprehensive picture of well-being in OECD countries and other major economies, by looking at people’s material living conditions and quality of life across the population. In addition, the report contains in-depth studies of four key cross-cutting issues in well-being that are particularly relevant: how has well-being evolved during the global economic and financial crisis?; how big are gender differences in well-being?; how can we assess well-being in the workplace?; and how to define and measure the sustainability of well-being over time?

OECD Science, Technology and Industry Scoreboard 2013: Innovation for Growth

October 31, 2013 Comments off

OECD Science, Technology and Industry Scoreboard 2013: Innovation for Growth
Source: Organisation for Economic Co-operation and Development

Published every two years, the STI Scoreboard analyses the major trends in knowledge and innovation in today’s global economy. Through statistical indicators it presents a policy-oriented review of science, technology, innovation and industrial performance in OECD and major non-OECD countries.

Brazilian economy is expanding again but long-term challenges remain, says OECD

October 23, 2013 Comments off

Brazilian economy is expanding again but long-term challenges remain, says OECD
Source: Organisation for Economic Co-operation and Development

Brazil has moved up the ranks of the world’s largest economies while making economic growth ever more inclusive. Renewed economic dynamism will allow it to continue converging with more advanced economies and ensuring that disadvantaged groups share in the benefits of future growth, according to the OECD’s latest Economic Survey of Brazil.

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