Arthur Néron-Bancel
In early 2011, massive popular uprisings across Egypt precipitated the fall of long-time ruler Husni Mubarak’s regime, after more than 30 years of semi-authoritarian rule.
However, more than two years later, the prospects of achieving sustainable and inclusive economic development in Egypt are very low. In fact, the country’s current short- to medium-term
economic outlook is in many ways far worse than it was before.
Over the recent years, Egyptian authorities have failed to react to rapidly rising costs from the convergence of a deep social and political crisis and a legacy of severe structural weaknesses from decades of political and economic mismanagement. Powerful political factors prevented the decisive and rapid adoption of the reforms that might have allowed the adjustments needed to avoid today’s impending crisis. Today it seems the country has no easy or cost-free way out, though one might hope that gradual reforms might still be able to avoid complete collapse or mitigate the depth and length of the crisis. The Central Bank of Egypt has begun to gradually devaluate its currency since early 2013 – a necessary move welcomed as a first step in the right direction. Similarly, negotiations with international lenders could hopefully lead to gradual and progressive structural reforms (incremental tax increases or subsidy cuts, with mechanisms designed to target the more wealthy and support the poorer classes).
However, similar structural reform packages in the past have had a very dismal track-record in terms of avoiding the tremendous social costs that are to be expected, and this makes the prospect of improved living conditions for the Egyptian population in the short- to medium-term (in terms of inclusive economic development and socio-political stability) very unlikely.
Professor: Anne-Laure Delatte
Date: April 2013
Words: 2,800
Throughout the late 1990’s and early 2000’s, international attention was increasingly drawn to a coordinated trend in the balance of payments of some of the world’s largest economies; indeed, a rapidly widening gap was appearing between one set of countries running growing current account surpluses on the one hand, and another group of countries accumulating current account deficits on the other. This structural process, commonly referred to as one of rising global imbalances, has since become recognized by analysts and policymakers as one of the most important characteristics of the contemporary international monetary system, both as an issue in itself as well as a reflection of a number of interrelated underlying international and domestic imbalances.
Writing in November 2009, in Global Imbalances and the Financial Crisis: Products of Common Causes authors Maurice Obstfeld and Kenneth Rogoff sought to provide an in-depth analysis of the numerous, complex and closely interlinked monetary and fiscal factors and policies that have converged and contributed to causing these growing imbalances. The authors also examine how this phenomenon might have contributed to the deep financial crisis that originated in the United States in late 2007 before spreading to other economies around the world thereafter.
Indeed, over the years a significant amount of debate has been generated around these questions, including what lessons need to be learned and which policies should be adopted in order to prevent future crises. In light of the devastating impacts of the subprime and global financial crises, it is extremely important to understand the origins and nature of the global imbalances, the implications that these imbalances have had (and may continue to have) on the growth and stability of the international system and national economies.
Professor: Anne-Laure Delatte
Date: April 2013
Words: 2,300
Fueled by loose domestic monetary policies and unimpressed by low yields at home, massive flows of hot money are increasingly leaving advanced economies towards rapidly-growing, capital-hungry emerging markets - and gradually shifting towards higher and higher levels of risk as they do so.
In light of these trends, we must draw lessons from the similar experiences of past financial crises. We cannot afford to blindly trust markets. We cannot ignore the great risks that large and volatile capital flows can create for financial and economic stability, especially in developing countries.
Professor: Anne-Laure Delatte
Date: May 2013
Words: 840