1qGLG9p

Recommendations

Info

66 Deleveraging, What Deleveraging performance and generating a reduction in corporate deposits in the domestic banking system (Shin, 2013). In terms of funding risks, the surge in issuance leaves these firms vulnerable to shifts in appetite among global bond investors, with the major international asset management firms the primary intermediaries in this market. In what follows, we examine the most critical cases among the emerging economies: China and the so-called ‘fragile eight’ (Argentina, Brazil, Chile, India, Indonesia, Russia, South Africa and Turkey). China: Between a rock (rising and high debt) and a hard place (lower growth) China is emblematic of the leverage cycle that we depicted in Chapter 3 – its position in this cycle makes it one of the candidates for the next episode of the debt crises that have plagued the world since the early 1990s. As per our taxonomy in Appendix 3A, a debt crisis does not necessarily involve massive defaults and/or contractions of output. In the case of China, if such a crisis were to occur in the relatively near term, it could plausibly take the form of a ‘Type 2’ crisis (as in Japan; see Appendix 3A), although not necessarily to the same extent and only if policymakers insist in leveraging up the economy for a prolonged period of time with the aim of keeping growth artificially high. Such adjustment would possibly be made easier by an increase in inflation and a depreciation of the exchange rate. However, a significant slowdown of Chinese activity and a depreciation of the currency would have a large impact on the world economy. Let us go through all the steps of the analysis leading to these conclusions. Thanks to the positive supply-side shocks stemming from the opening to free markets at the end of the 1980s compounded at the end of 2001 by the accession to the WTO, China boosted its real growth rate well into double digits until 2007. The top panel of Figure 4.24 shows an acceleration of real GDP growth over that period, as measured by different filtering techniques. The bottom panel of the same figure shows that nominal growth accelerated as well.
Case studies 67 Figure 4.24 Measures of real and nominal GDP growth in China 13.0 12.5 12.0 11.5 11.0 10.5 10.0 9.5 9.0 8.5 8.0 7.5 7.0 HP Filter Measures of Chinese real GDP growth WTO 6-year moving average Potential: 3-year moving average 6.5 91 93 95 97 99 01 03 05 07 09 11 13 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 Measures of Chinese nominal GDP growth 6-year moving average HP Filter 91 93 95 97 99 01 03 05 07 09 11 13 Source: Authors’ calculations based on OECD and national accounts data. The acceleration of potential growth is consistent with strong data on productivity and demographic growth in the first half of the first decade of this century (see Figure 4.25). In this period of strong, organic expansion, leverage in the Chinese economy was consistently stable. Consistent with the ‘leverage cycle’ hypothesis (see Chapter 3), it was only when growth started to fade that China decided to ‘fight the trend’ by leveraging up. In particular, the 2008 debt crisis in advanced economies hurt Chinese exports at a time when the productivity boost stemming from the WTO accession and the impulse from demographics were about to turn.
Page 1:
Geneva Reports on the World Economy
Page 4 and 5:
International Center for Monetary a
Page 6 and 7:
International Center for Monetary a
Page 8 and 9:
Acknowledgements We thank Susan Lun
Page 11 and 12:
List of Conference Participants Edm
Page 13 and 14:
List of Conference Participants xi
Page 15 and 16:
List of Conference Participants xii
Page 17:
Foreword Since 1999 the Geneva Repo
Page 20 and 21:
2 Deleveraging, What Deleveraging 1
Page 22 and 23:
4 Deleveraging, What Deleveraging S
Page 24 and 25:
6 Deleveraging, What Deleveraging l
Page 26 and 27:
8 Deleveraging, What Deleveraging i
Page 29 and 30:
2 Global debt analysis: Deleveragin
Page 31 and 32:
Global debt analysis: Deleveraging
Page 33 and 34: Global debt analysis: Deleveraging
Page 35: Global debt analysis: Deleveraging
Page 38 and 39: 20 Deleveraging, What Deleveraging
Page 105 and 106: 6 Discussions Morning discussion Ma
Page 107 and 108: Discussions 89 He also agreed with
Page 109 and 110: Discussions 91 urged the authors to
Page 111 and 112: Discussions 93 moving demographic c
Page 113 and 114: Discussions 95 about potential GDP
Page 115 and 116: Discussions 97 when there is no com
Page 117 and 118: Discussions 99 In response to Laure
Page 119 and 120: Data Appendix Debt typically expres
Page 121 and 122: References Adrian, T., E. Moench an
Page 123 and 124: References 105 Jorda, O., M. Schula
Page 125: It is widely accepted that high lev
show all

1qGLG9p

Create successful ePaper yourself

Delete template?

Save as template?