This is an archived version of the PW Sources newsletter from Saturday, July 29. Sign up to receive PW Sources directly to your inbox here.

BANKING CLUBS

Between the late 1950s and the 1970s, several European commercial banks formed clubs to share information and collaborate on services. 

In a 2011 book, RICHARD ROBERTS and CHRISTOPHER ARNANDER argue that the clubs emerged as a response to the rising dominance of US banks. 

From the text:

“Following the establishment of the European Economic Community in 1957, the expectation of European financial and economic integration led many major European banks to seek ways of fostering cross-border co-operation. To this end, five far-ranging bank associations, club-like in character, were formed between banks of different European nationalities. The European banking clubs were intended to stimulate a broad exchange of information between members and the joint development of marketing, technology and research. Exchanges of personnel were encouraged and they were regarded as important for training. A variety of joint business undertakings were pursued, including the formation of consortium banks and the co-financing of large projects. These joint ventures provided a means for sharing the costs and risks of developing an international presence, particularly outside Europe. They were expected to enhance services to corporate clients in each other’s home markets and to resist the mounting challenge from the major US banks—Le Défi Américain (The American Challenge). Some of the clubs at times were even regarded as laying the groundwork for cross-border mergers and the formation of pan-European banks. But these visions did not bear fruit. Instead, from the mid-1970s the major European banks began to develop their own presence in each other’s markets, undermining the purpose and roles of the banking clubs.” 

+  “As these clubs were limiting competition between their members, they were somehow at odds with the idea of a common market in banking, which, on the contrary, aimed at enabling banks to freely compete on the EEC countries’ markets.” By Alexis Drach. Link. 

+  “In the 1970s, European banks, and their banking clubs, shifted their focus on the Eurodollar markets from Luxembourg, as an international currency hub, to London where the US banks were operating.” By Mareike Beck. Link. 

+  “Clubs and consortia represented a crucial and cost-effective link between two different visions of international banking, the scattered and independent initiatives of the 1950s and 1960s and the autonomous initiatives of the 1980s onwards.” By Carlo Edoardo Altamura. Link. 

NEW RESEARCHERS

Global Banks

ROCÍO E. SUÁREZ is an assistant professor in economics at Washington College. In her job market paper, she explores the effects that holding reserves accumulation during trade shocks has on sovereign default.

From the abstract: 

“How large are the benefits of holding international reserves under terms of trade shocks when sovereign debt is denominated in foreign currency? To answer this question, we develop a model of endogenous sovereign default with international reserves accumulation. A negative terms of trade shock increases the service cost of debt but, at the same time, it raises the value of international reserves holding which may help reducing default risk. Calibrated to 16 emerging economies over the period period 1997-2019 we find that, in a model with no reserves accumulation, default risk is twice as high relative to the benchmark calibration and consumption falls 50% more when the economy is hit by a terms of trade shock. Not holding reserves increases the volatility of consumption by 17% with respect to the benchmark, 40% more than a model with no terms of trade variability.”

+ + +

+  “Andry argues that these left policies constituted a coherent alternative to the neoliberal version of European integration which ultimately manifested, but that leaders of the western European left missed a crucial ‘window of opportunity’ to implement them.” New on PW, Neil Warner reviews Aurélie Andry’s Social Europe, The Road not Taken. Link.

+  “One advantage of the Chinese model is its unique blend of political centralization combined with economic and administrative decentralization.” Also new on PW, Poornima Paidipaty interviews Pranab Bardhan. Link.

+  “For a country—and a region—accustomed to spending what it doesn’t have, the idea of saving part of the wealth and investing it for higher future returns once the energy transition arrives is revolutionary.” In Bloomberg, Juan Pablo Spinetto writes about Brazil’s subnational social wealth funds, referencing a JFI report by Andrea Gama. Link and link. 

+  “In Cameroon, the unintended consequences of Nigeria’s fuel subsidy withdrawal ripple across the beleaguered Anglophone region.” By Francis Tim Mbom. Link. 

+  Will Bateman on the fiscal role of the US Fed. Link. And see Bateman’s recent PW essay, co-authored with Jens Van ‘t Klooster, on the history of monetary financing. Link. 

+  “Instead of a simple, linear process of diffusion, the electric avatar of Western-style fossil capitalism arrived in the colonial periphery belatedly, haphazardly, and reluctantly.” By Elizabeth Chatterjee. Link.

+  Indrajit Roy on the “politics of the poor” in India. Link. 

+  “We estimate that physicians lose 18% of Medicaid revenue to billing problems, compared with 4.7% for Medicare and 2.4% for commercial insurers.” By Abe Dunn, Joshua D Gottlieb, Adam Hale Shapiro, Daniel J Sonnenstuhl, and Pietro Tebaldi. Link.

+  How landless peasants become urban landlords in Shanghai and Guangzhou, by Saul Wilson. Link.

+  “In post-slavery Brazil, Afro-Brazilian women worked for paltry sums in the homes of wealthier (not necessarily wealthy) families. But the precise arrangements varied significantly. Some received a consistent (though low) wage, which they would use to support their family. In other cases, women were not paid or paid a very low wage and/or served as live-in employees on call 24 hours a day. Moreover the complete transference of poor, mainly Afro-Brazilian children into white and/or wealthy families occurred in the Northeast. Initially labeled ajuda contratada (contracted help), a young girl would be sent to work in the home of a wealthy family when she was only a few years away from marriage. She usually received no compensation apart from receiving food and housing in return for her labor. Her presence in the wealthy home was considered merely a transitional period until marriage.” By Elizabeth Hordge-Freeman and Jaira J. Harrington. Link. 

Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations: editorial@jainfamilyinstitute.org