Browsing by Author "Fromlet, Hubert"

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  • Fromlet, Hubert (2014)
    BOFIT Policy Brief 15/2014
    During and after the Central Committee’s Third Plenum in November 2013, China announced far-reaching reforms in the spheres of marketization and economic deregulation that included financial markets. While the speed of the rollout of China’s planned reforms is still unknown, officials repeatedly reference the great opportunities for guiding China onto a healthier, more sustainable social and economic track. The risks of such ambitious marketization and deregulation plans need to be considered in the context of speed and sequencing of reforms of the financial sector. We currently lack the skills for overcoming the famously low predictability of financial crises. The areas for skill improvement largely relate to market psychology (behavioral finance) and the understanding of history and macrofinancial aggregates. The much-undervalued discipline of behavioral finance has started to come into its own over the past 10 to 15 years, including the awarding of the 2013 Nobel Prize Robert in Economics to Robert Shiller for his efforts at understanding the psychology of financial markets. This year’s Nobel Prize winner, Jean Tirole, also considers behavioral aspects in his work. Sweden has had two serious banking crises in the past 30 years. The first – and most serious – crisis occurred in the early 1990s, while a smaller crisis took place at the end of the last decade. Both were foreseeable. The first crisis emerged as Swedish banking entered uncharted deregulation waters, a situation Chinese reformers will themselves inevitably confront. Swedish research findings with respect to sequencing, speed of reforms and behavioral finance apply nicely to the Chinese discussion. The italicized discussion focuses on what the Swedish deregulation experience means for Chinese policy choices, but most of these observations are generally relevant for policymakers in emerging markets in Asia and elsewhere. Publication keywords: financial deregulation, Asia, Sweden
  • Fromlet, Hubert (2013)
    BOFIT Online 4/2013
    A review of the economic press and literature reveals that there is little research and analysis on the important issue of the Chinese governmental debt and budget deficits. This is astonishing since the Chinese economy has by now climbed to the second position in global GDP ranking. Thus, China's government debt matters increasingly to the rest of the world as well, both in a corporate and a macroeconomic perspective. Furthermore, not enough is known about the real size of the total Chinese government debt. Insufficient statistical transparency is an important reason for this shortcoming, but this should not serve as an excuse. Increasing efforts are needed to provide China and the rest of the world with better information on the real state of Chinese government debt. In this paper, an attempt is made to explain and discuss the real situation when it comes to the Chinese government debt. The current Greek/Southern European debt misery clearly shows that opaque statistics cannot be hidden away forever without sooner or later puzzling and/or frightening the financial markets. On the other hand, China cannot be analyzed completely with Western eyes. The sooner Chinese decision-makers decide on greater transparency in the government debt situation, and decisive steps towards more efficient fiscal policy are taken, the better the consequences for China itself and the global economy. The alternative - continuous opaqueness and a possible future fiscal explosion - could certainly do a lot of harm to China, but also to the global economy. There is no reason to underestimate this medium and long-term risk. The short-term perspective looks safer. There should be room for a greater exchange of views and co-operation between EU and China, too. The EU's own bad experience from the past few years could be a realistic starting point. JEL Classifications: D02, D82, H70, H74, O53, P35