Contents
Notes on Contributors
List of Figures
List of Tables
Introduction
Part I: Challenges Ahead
What Next for the Post Covid Global Economy: Could Negative Supply Shocks Disrupt Other Fragile Systems?
The Nature of the Policy Problem
Could Economic Stability Be Threatened by Negative Supply Shocks?
Indicators of Underlying Fragility
Supply-Side Shocks to Date and the Policy Reaction
Further Negative Supply-Side Shocks and the Implications for Future Inflation
Could Political Stability Be Threatened by Economic Instability?
Indicators of Underlying Fragility
More Direct Evidence That Democracy Is Under Threat
What Policy Measures Might Help Restore Stability?
References
Historical Roots, Cultural Selection and the ‘New World Order’
Introduction
Three Post-war Eras
The First Era (i.e. the Three Decades Following the End of World War II in 1945)
The Second Era (i.e. the Thirty Years Following 1975)
The Third Era (Where We Are Now After 2005)
Four Perspectives
First Perspective: Fukuyama’s Prediction of ‘Immaculate Convergence’
Second Perspective: Gerard Roland’s Postulate of Cultural Determinism
Third Perspective: Non-cooperative Game Theory
Fourth Perspective: Darwinian Cultural Competition
A Focus on Russia
The First Perspective—Fukuyama’s Forecast
Second—The Role of History
The Third Perspective—On Life Outside the Narrow Corridor
The Fourth Perspective: Cultural Competition
Conclusion: History Matters, but Cultures Evolve—In Competition
Epilogue
Annex: On USSR/Russian Governance 1990—2019: Gorbachev, followed by Yeltsin, then Putin
References
Part II: China
President Xi’s Perfect Storm
The Andy Warhol Theory of Economic Growth
China’s Population Dynamics
The Crash in the China Real Estate Market
The Most Expensive Bailout in History
Economic Decoupling and the Shrinking of China’s International Competitive Advantage
Financial Decoupling—The Impact of the Perfect Storm on China’s Trading Partners
Conclusion
References
Growth Without Democracy: Has China’s Time of Rapid Growth Come to an End?
Why Did China Change Course Early in the Twenty-First Century?
President Xi Jinping’s New Strategy
New Political Institutions and Policy
New Economic Institutions and Policy
The Long-Term Outlook
The Dictator’s Dilemma and Cyber Dictatorship
Growth Theory and Proximate Causes of Growth
Conclusion
References
Denunciations in Autocratic Regimes: How and When Do They Work
A Theoretical Approach to Denunciation
Denunciation in the Volunteer Model
Denunciations in the Coercion Model
Coercion or Volunteer Model?
A Community for Denunciations
Conclusion
References
Dollar Funding Stresses in China
Warning Signs: Evidence of Dollar Funding Stress in March 2020
The Extent of China’s Dollar-Denominated Debt
The Dollar Exposures of China’s Banks
The Dollar Exposures of China’s Non-financial Firms
China’s US Dollar Exposures Are Growing
Spillovers from China
Potential Solutions to a Lack of US Dollar Funding for China
Actions by Chinese Authorities
China’s Foreign Exchange Reserves
The FIMA Repo Facility
Other Countries’ Swap Lines
Chiang Mai Initiative Multilateralization
Avenues Through Hong Kong SAR
The Ability to Post Chinese Bonds as Collateral Internationally
Conclusion
References
Part III: Ukraine
Economic Consequences of Global Tensions
Introduction
Shocks: Identifying and Quantifying Global Tensions
Predicting Shocks
Transmission Mechanisms: Economic Strategic Interactions
Policy Responses
Conclusion
References
Reconstruction, EU Accession, and Reform of Ukraine
Introduction
Russia’s Aims and Destruction
Ukraine Needs Reconstruction, Reform, and EU Accession
Financing
How to Organize the Reconstruction
Structural Reforms
Conclusion
Different Choices, Divergent Paths: Poland and Ukraine
History and Initial Conditions
General Methodological Framework and Determinants of Growth
A. Investment, Trade, and Education
B. Industrial Structure
C. Democracy and Governance
D. Monetary and Fiscal Policy
E. Labour
Conclusion
References
Russia’s Use of the Kosovo Case to Legitimize Military Interventions and Territorial Conquests
Framing the Kosovo Case
Russia’s Intervention in Georgia
Using Ukraine as a Case for Territorial Revisions
Conclusion
References
Part IV: Central Banking and Financial Integration
Relearning Inflation Control in the Post-Covid Era
Introduction
Rediscovering Inflation Control
The Taylor Rule
Why Are the Fed, the ECB, the BoE, and Even the BoJ so Far Behind the Inflation Curve?
The Inescapable Fiscal Dimension of Central Bank Activity, Fiscal Dominance, and Fiscal Capture
The Intertemporal Budget Constraint of the State and the Lure of Monetary Financing
Could There Be a Painless r < g Solution to the Public Debt Sustainability Conundrum?
Central Bank Responses to the Public Debt and Deficit Overhang
Fiscal Dominance and Central Bank Independence? The Case of the ECB
Conclusion
References
How the Flows Change When Interest Rates Are Normalized: Risk to Economic and Financial Stability
Introduction
Lessons from the 1980s
Capital Flows and Systemic Risk
External Imbalances and Systemic Risk
Conclusions
References
Policy Responses in Small Economies to Stability Challenges from Cross-Border Financial Integration
Introduction
Stability Challenges from Cross-Border Financial Integration
Policy Responses
Structural Reforms and Resilience
Exchange Rate Arrangements
Stabilisation Tools
What Options Have Been Chosen?
Multilateral Constraints and Policy Advice
Developing an Integrated Policy Framework
Concluding Remarks
References
Part V: The International Monetary and Financial System
The Fed’s Swap Lines: Narrow Circle, Broad Effect?
FED’s Networks of Bilateral Swap Line During the Global Financial Crisis
FED’s Networks of Bilateral Swap Line During the COVID-19 Crisis
Concluding Remarks
References
Bond Market Crises and the International Lender of Last Resort
Last Resort Operations in Securities Markets: A Typology
The Bond Market Crisis of 2020
Bond-Buyer of Last Resort and Central Bank Swaps
References
Telegraph to Tether: Challenges in the Global Payments System and the Struggle between Private and Public Interests
Origins of Clearing House Interbank Payments System (CHIPS) and Settlement Risk
Origins of SWIFT and Messaging
Conclusions and Prospects
References
Stablecoins
The Stablecoin Market
Tether
Dai
TerraUSD
Libra
EU Regulation
Challenges and Issues in Regulating Stablecoins
Regulation for Consumer Protection Is Necessary
Effective Regulation May Be Difficult
Regulation May Be an Attempt to Kill Off Competition
Regulation Might Lead to Regulatory Arbitrage, and It Might Kill Off Innovation
Regulation Might Kill Off DeFi
References
Part VI: Global Warming
The Yellow Brick Road to a Decarbonized World Economy
Introduction
The Development in GHG Emissions over Time. Towards a Decarbonized Economy?
Decarbonization and Decoupling
Is Decoupling and Decarbonization Taking Place?
Mitigation Efforts
The Future
Three Challenges to Policymakers—How to Move Forward?
Move from Relative to Absolute Emission Reductions, from Sector to Systems Perspectives
Looking Beyond National Borders and Across the Life Cycle
A New Narrative Is Needed
Conclusion
References
Part VII: Consequences of the Economic Slowdown
The Need for Growth
The Sources of Growth
Growth Epochs
The Consequences of the Growth Slowdown
A Return of Growth
References
Index