The motivation for this thesis began with observations of the debate in the media over the implications of the debt crisis, who was to blame and possible solutions. The terminology used (liquidity, solvency, default, repudiation, arrears, etc.) was not considered to be helpful in critically analysing the situation. Indeed, this terminology was likely to create confusion when trying to understand the causes, consequences and alternatives for the debt crisis. What causes debt repayment problems. Why do borrower countries prefer to suspend debt repayments rather than simply repudiate debt. How have lenders coped with this situation. Is there any evidence of an improvement in the situation. For a reader interested and familiar with the debt literature, these questions are not new. What is important is to have an understanding of the possible remedies and be able to design a solution that might resolve the debt crisis in a timely manner rather than allow it to drag on indefinitely with all the costs that that would imply. This thesis explores these questions and shares the views of the advocates of debt relief as part of the solution to the debt problem. In order to place the debt problem in context, the thesis begins with a brief historical account of the borrowing practices of Latin American countries since their independence from Spain. Default is not a new phenomenon. What is new is the source of lending (private banks and not bond holders) and the institutions involved (IMF and World Bank). This has implications for the way debt has been handled which we explore in chapter 1. In addition we review the efforts of researchers in modelling sovereign loans, explaining debt restructuring and searching for the determinants of debt repayment problems. The complexities found when dealing with sovereign loans lie in their nature, or more simply, the lack of collateral. In chapter 2, we take into consideration more explicitly the peculiar nature of sovereign loans and design a two period horizon pure "willingness to pay" model to explore its implications in the loan market equilibrium. If we assume sufficiently risk-averse borrowers and neither adverse selection nor moral hazard, we find that the competitive equilibrium is inefficient. We then reframe this basic model into a bilateral monopoly context and include some bargaining elements. We derive the elements of conflict, the Pareto negotiation locus and discuss possible bargaining solutions in the context of the static axiomatic approach. The design of any solution to the debt crisis requires an understanding of what precipitates a borrower into arrears. Chapter 3 offers an empirical study of LACs during 1971-86 which aims to compare different empirical specifications and trace variables that might usefully be included in our statistical model. Using those results, in chapter 4, we test our empirical model which now includes economic indicators, "crude" political proxies and country heterogeneity fixed effects. Our findings suggest that they are relevant in the assessment of the causes of debt servicing problems. Finally, in chapter 5, we consider the debate concerning "debt overhang" in Latin America. We also provide an account of how the debt problem has been managed and conclude that a prompt solution can not rely on "refinancing" nor on voluntary market debt reduction schemes.

This study focuses on Private Finance Initiative (PFI) policy in the UK and specifically the relative policy inertia that has characterised the development of this procurement method. PFI is a contract between the public and private sector, where the private sector is responsible for the design, build, finance and operation of a public sector asset and associated services. UK PFI policy has persisted virtually unchanged in its structure for almost two decades, despite criticisms of the policy and a lack of evidence that it is effective and efficient. In order to explain this pattern this study explores the responses of the National Audit Office (NAG), Parliament and PFI private sector companies to the developments of UK PFI policy via a content analysis of relevant reports. In doing so, this dissertation is able to present PFI policymaking as a dynamic process in which different stakeholders (the NAO, Parliament and private sector companies) react to policy challenges and actively influence policy developments. Accordingly, it is noted that the private sector has not been a passive bystander in the PFI policymaking process but used assertive impression management techniques during periods of change in PFI use to gain and maintain legitimacy of PFI in public policy contexts; and thus was able to maintain favourable conditions for itself. The study also suggests that the NAO frequently commented on PFI in ways, which legitimised existing practice, whereas Parliament (particularly the Public Accounts Committee) was more critical of PFI and placed greater focus on potential taxpayer concerns. As an overall conclusion, this work suggests that the NAO, Parliament and private sector responses can help explain the continued political support for PFI and its relatively unchanged structure, which has been maintained despite criticisms and concerns regarding fundamental principles, such as value for money.

No description available.

Over the past two decades the corporatist-continental welfare states of France and Germany have come under strong budgetary stress. As social expenditure accounts for around half of public spending in both countries, its retrenchment has been prominent on the political agenda. However, governments seeking to contain social spending face the problem that due to the institutional characteristics of the countries' social insurance programmes, a large share of the social budget is pre-committed and largely outside their control. This study analyses how France and Germany have dealt with the strong pressures for retrenchment on the one hand, and high barriers for reform on the other between 1990 and 2005. By identifying systematic links between specific institutional commitment devices, cost-containment strategies and outcomes, it sheds light on the causal mechanisms behind the concept of path-dependency. It demonstrates that contrary to common perceptions, the de-facto degree of fiscal commitment in the French and German welfare states differs quite considerably between insurance sectors and individual schemes. These differences have a systematic effect on the degree to which the governments in both countries have regained influence over the determination of spending in these schemes and therefore over their social budgets. According to the 'old politics' of the welfare state tradition and fiscal institutionalism literature, the nationally distinct actor constellations with regard to corporatist relations and budgetary allocation processes in the two countries should lead to different reform developments. This study challenges these arguments and shows that the motives and influence of the identified actors are strongly mediated by sectoral institutions. This strengthens arguments for a closer combination of both 'new' and 'old' arguments in welfare reform research, as well as for a more differentiated, scheme-specific perspective in analysing path-dependent reform processes and institutional lock-in.

This thesis examines the bi-directional relationship between sovereign credit ratings and financial market volatility. Prior literature focuses on one aspect of the relationship which is the impact of credit rating actions on financial assets’ returns, whereas the links between rating actions and market volatility have attracted little attention. Based on a comprehensive dataset of rating events from the three largest credit rating agencies (CRAs) i.e. S&P, Moody’s, and Fitch, this thesis presents unique evidence of (i) inter-relationships between sovereign rating information and equity market volatility dynamics; (ii) heterogeneous effects of sovereign rating actions on equity and foreign exchange market volatilities; (iii) volatility spill-over effects of rating actions. Several methodologies are employed in order to confirm the robustness of the findings, including event study, multivariate regressions, non-parametric tests, Vector Autoregressive models, probit analyses, and Monte Carlo experiments. The findings reveal that certain types of rating news play an important “confirmation role” whereby rating actions can reduce market ex-post volatility and ex-ante uncertainty. Also, there is evidence of differences in rating policies and timeliness across CRAs which provides some explanation for the heterogeneous effects of rating actions. Rating news which incorporates new information, either negative or positive, is associated with elevated ex-ante market uncertainty and ex-post volatility, while additional rating news which is not new to the public can lead to reduced market uncertainty and volatility. The contribution of this thesis is threefold. First, the findings contribute significantly to the debate on the information content of rating news and highlight the importance of multiple ratings in coordinating investors’ heterogeneous beliefs. Second, the thesis provides valuable insights for the debate on the role and regulation of CRAs since the global financial crisis. Third, the findings offer practical implications for option traders, international investors, financial institutions, and portfolio managers.

This thesis investigates statistically the existence of a long-run relationship between public expenditure and GNP (Wagner's Law) using data for Turkey over the period 1950-1990 and examines whether there is a structural break in the public expenditure series as a result of the 1974 Cyprus War (Peacock and Wiseman's Displacement Effect Hypothesis). In the public finance literature several models have been used to explain public expenditure growth. For example, macro models such as Wagner's Law, Peacock and Wiseman's displacement effect hypothesis, and microeconomic (or decision process) models of public choice. This thesis concentrates on macro models. These models try to explain the time pattern of public expenditures relative to broad aggregate variables such as GNP. In terms of macro models, the most prominent empirical generalisations about public expenditure growth are Wagner's Law and the Displacement Effect Hypothesis. Recent developments in time series analysis, such as cointegration analysis, investigate long-run relationships between variables, which allow us to apply news tests to Wagner's Law. Using the Eagle and Granger cointegration test and Turkish time series aggregate data for the period 1950-1990, we find no empirical support for Wagner's Law. Recent advances in times series analysis allow us to test for the existence of a structural break in the series for public expenditure arising from the 1974 Cyprus War. The results do not support the existence of a displacement effect hypothesis due to the Cyprus War. Using disaggregated data (public expenditure by economic and functional categories), Engle-Granger cointegration and causality test results provide some evidence in favour of Wagner's Law. Finally, a synthetic approach encompassing various theories of public expenditure growth (e.g. Wagner's Law, displacement effect hypothesis, demographic variables, relative prices and some dummy variables for country specific conditions) has been used to model public expenditure growth. The results provide some new evidence for Turkey.

As in most other developed countries, the growth of the public sector has become an important issue in the economic and political debate of Korea in recent years. In 1953 the public sector was relatively small compared to other developed countries, but since the end of the Korean War, the public sector has grown dramatically. Over the last four decades, governments have exerted an enormous influence on the level and allocation of scarce resources in the economy. Especially, since the early 1960s, government involvement in the economy has increased rapidly to promote export and economic growth. Although the public sector has played an important role during the Korean modernisation process and public expenditure has grown rapidly, few studies have been carried out to explain the sustained growth of public expenditure in Korea. These thesis seeks to explain the nature and causes of the growth of government expenditure in Korea for the period of 1953-1991. This thesis reviews nine alternative theories of government growth which attempt to explain the observed phenomenon of the rising trend in public expenditure. After reviewing theories of public expenditure growth, we analyse the applicability of these leading hypotheses on public expenditure behaviour with data taken from Korea during the period 1953-1991. Our empirical study shows that Wagner's hypothesis of expanding state activity is more reliable than Peacock and Wiseman's displacement effect hypothesis in explaining the Korean case. Moreover, our empirical research indicates that the income effect, the relative price effect and the lagged dependent variable are the main causes of the expansion of government expenditure in Korea over the study period.

In this study the demand for foreign debt was disaggregated into government demand and private sector demand. Hence, two demand models have been specified. Where, the government maximises an expected quadratic preference function, and the private sector maximises the expected returns from its financial portfolio. The two models are then empirically tested on data from the three Arab countries. Furthermore, the two models are then combined and empirically tested and compared to the disaggregated model. The general framework of this study is that the governments of the Arab countries under study pursue internal and external acceptance in an effort to remain in power, which is empirically supported here. Increasing government expenditure, which implies higher budget deficit, reflects the government's efforts to gain internal acceptance. On the other hand, opening up the domestic economy to the world indicates the government's efforts to gain international acceptance. This study concludes that the Arab countries under study have been undergoing imprudent economic policies that mainly accommodating the government's credit requirements. It has shown that the countries had accepted irresistible foreign loans contracts possibly to finance the current account deficits. Further, the IMF stabilisation program requirement to devalue the national currency, in order to increase foreign exchange inflows and hence reduce foreign debt, founds not to be working for the three Arab countries under study.

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This thesis looks at the role of non-state actors in the regulation of risks. Regulation, conceptualised in this thesis as revolving around the anticipation and management of risks in economic life, is no longer considered to be a purely state-based activity, but is increasingly viewed as an activity that can involve a variety of actors including nonstate actors such as civic organisations and commercial firms. The limits on the ability of states to regulate risks on their own are becoming more and more visible in today’s integrated and interdependent markets. Our thinking about the capacity of the state to control is especially challenged by transnational risks, such as exemplified by the global financial crisis of 2007-08. Transnational risks easily spread across national borders. However, our knowledge about how non-state actors may be and can be involved in the regulation of risks, at both national and transnational levels, is predominantly theoretical and needs to be examined more critically and above all empirically. In this thesis a case study is presented of the credit rating industry. The credit rating industry has recurrently been identified as an important industry with regard to helping manage credit risk in the global debt capital markets. Using data collected through a documentary survey and 31 semi-structured interviews with current and former staff of rating agencies, this thesis explores the extent to which the credit rating industry is involved in three main components of a risk regulation regime: standard-setting, information-gathering, and behaviour-modification. The thesis will show that there are strong indicators that the credit rating industry is exercising regulation even though rating agencies expressly deny being a regulatory actor. It will discuss the ways in which rating agencies set standards of credit risk, gather and analyse vast amounts of information to assess how issuers of debt measure up to these standards, and aim to influence the behaviour of actors in debt capital markets through their rating processes and the credit ratings that they publish.