World

One of my favourite exam questions is: "Given our extensive knowledge about the causes of financial crises and the measures needed to prevent them, why do they happen so frequently?" We have had a deep understanding of financial crises for over 200 years. A 19th-century central banker dealing with the severe crisis of 1866 would find few surprises in the more recent ones. All crises share the same fundamental causes. Excessive leverage renders financial institutions vulnerable to even small shocks. Self-preservation in times of stress drives market participants to prefer the most liquid assets. System opacity, complexity, and asymmetric information make market participants mistrust one another. These three fundamental vulnerabilities have been behind almost every financial crisis in...

Good morning. It is an honor to join you here at the AI for Good Global Summit. We are hearing about some of the extraordinary ways Generative Artificial Intelligence could benefit our societies, including helping us live healthier lives and accelerating scientific breakthroughs. Many experts also believe the technology could provide significant economic benefits, for example by providing a serious boost to productivity. This could help lift the global economy at a time when the growth outlook for the medium term is the weakest in decades. This said, many also agree that AI’s promise comes with considerable uncertainty and significant risks. To date, most warnings have focused on security, privacy, misinformation, and ethical concerns. Taking an economic perspective, I would like...

Sri Lanka's central bank decided to maintain interest rates unchanged on Tuesday in order to keep inflation under control. As the country continues to grapple with the severe financial crisis, the rate hold comes as a measure to stabilize the economy. The Central Bank of Sri Lanka (CBSL) announced that it has kept the Standing Deposit Facility Rate steady at 8.50 per cent and the Standing Lending Facility Rate at 9.50 per cent. In March, the CBSL implemented a 50 basis points reduction in rates as part of its ongoing easing cycle, which has resulted in a total decrease of 700 basis points since June. As per a report by Reuters, this partially offsets the 1,050 basis points increase that occurred since April 2022. In April month, Sri Lanka's annual inflation rate stood a...

Chinese leader Xi Jinping's relentless pursuit of multi-storied housing projects has pushed country's once flourishing real estate sector into deep uncertainty. Now a study has found that China's middle-class families remain vary of spending on property.  In a quarterly survey of household wealth and income, researchers at a Chinese university found that their index of families' expected future spending was even lower than the early days of Covid pandemic, South China Morning Post reported. In the China Household Wealth Index Survey conducted by Southwestern University of Finance and Economics in Chengdu, Sichuan province, the index of spending expectations fell to 101.9 in the first quarter of this year, down from 103.0 in the fourth quarter of 2023.The survey measures the spe...

The Politics of the Economic Crisis in Asia: Consensus and Controversies offers an assessment of the political economy factors that contributed to the Asian financial crisis and that will shape its recovery. It reports the findings of the Carnegie Economic Reform Network meeting in Bangkok in June 1999, which included former financial Ministers, high ranking regional officials and academics, and staff of the Carnegie Endowment for International Peace. This publication was prepared by Lesley O'Connell under the direction of Nancy Birdsall. The Background paper on which it is based was prepared by Stephan Haggard, with input before the meeting and revision after by Daniel Morrow, Nancy Birdsall, and David Lipton. 62 pp.

James Carville, Bill Clinton’s political advisor famously said that when it came to elections it was the economy, stupid. This year’s presidential election is likely to prove no exception. Six months before that election, a constellation of economic risks is building both at home and abroad that could shake markets and cause another inflation spike. It could also precipitate a financial crisis as occurred on the eve of the 2008 election with the Lehman bankruptcy. Last week’s unprecedented and massive Iranian missile and drone attack on Israel underlines the risk that the Middle East conflict could widen in the run up to the presidential election. The war with Gaza is far from over and Hezbollah, an Iranian proxy, keeps firing rockets at Israel. A broader Middle East war could reverse ...