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Pension fund assets in OECD countries hit a record USD 20.1 trillion in 2011 but return on investment fell below zero, with an average negative return of -1.7%s, according to the OECD’s latest Pension Markets in Focus. The report says that weak equity markets and low interest rates drove the poor performance.
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During the current global crisis, capital inflows into Asian countries have increased,leading to excess liquidity and the risk of potential asset bubbles.
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Banks have been lowering their high pre-crisis leverage levels and are preparing for stricter regulatory capital requirements, and in the process have been reducing their lending. With the banking sector expected to shrink considerably, other actors, especially institutional investors, and new forms of financial intermediation will have to meet the credit needs of the economy.
A lack of finance for water resources management is a primary concern for most OECD countries. This is exacerbated in the current fiscal environment of tight budgets and strong fiscal consolidation, as public funding provides the lion’s share of financial resources for water management.
The report provides a framework for policy discussions around financing water resources management that are taking place at local, basin, national, or transboundary levels. The report goes beyond the traditional focus on financing water supply and sanitation to examine the full range of water management tasks that governments have to fulfill; when appropriate, a distinction is made on distinctive water issues.
The report identifies four principles (Polluter Pays, Beneficiary Pays, Equity, Policy Coherence), which have to be combined. In addition, it identifies five empirical issues, which have to be addressed on a case-by-case basis. Finally, it sketches a staged approach that governments might wish to consider, to assess the financial status of their water policies and to design robust financial strategies for water management. Case studies provide illustrations of selected instruments and how they can be used to finance water resources management.
This report analyses the results of simulations using an agent based model of financial markets to show how excessive levels of leverage in financial markets can lead to a systemic crash. Investors overload on risky assets betting more than they have to gamble creating a tremendous level of vulnerability in the system as a whole. Plummeting asset prices render banks unable or unwilling to provide credit as they fear they might be unable to cover their own liabilities due to potential loan defaults. Whether an overleveraged borrower is a sovereign nation or major financial institution, recent history illustrates how defaults carry the risk of contagion in a globally interconnected economy. The resulting slowdown of investment in the real economy impacts actors at all levels, from small businesses to homebuyers. Bankruptcies lead to job losses and a drop in aggregate demand, leading to more businesses and individuals being unable to repay their loans, reinforcing a downward spiral that can trigger a recession, depression or bring about stagflation in the real economy. This can have a devastating impact not only on economic prosperity across the board, but also consumer sentiment and trust in the ability of the system to generate long-term wealth and growth.
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Prepared for the G20 Los Cabos Summit, this policy note discusses the potential for and the barriers to pension funds investing in green infrastructure projects.
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This special issue of Financial Market Trends compiles selected articles based on presentations given at the Symposium on “Financial crisis management and the use of government guarantees” in October 2011, which were first released between October and December 2011. The Symposium, part of the OECD’s work on financial sector guarantees, gathered policy makers, policy consultants and other academics to discuss the policy response to the
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The incidence of perceived implicit guarantees, mostly from governments, for the debt of European banks has decreased recently after several years of increase dating from the beginning of the financial crisis. This reflects to a large extent the deterioration in the strength of the sovereigns that are seen as providing the guarantees..
This book examines pension reform during the crisis and beyond, the design of automatic adjustment mechanisms, reversals of systemic pension reforms in Central and Eastern Europe, coverage of private pension systems and guarantees in defined contribution pension systems.
This project explores how the structure of international capital flows drives financial fragility, and examines how policies can help increase financial stability.