Risk Transfer Research Papers - Academia.edu (original) (raw)

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- Peru, Vietnam, Applied Economics, American

In 2006, Mexico became the first transition country to transfer part of its public-sector natural catastrophe risk to the international reinsurance and capital markets. The Mexican case is of considerable interest to highly exposed transition and developing countries, many of which are considering similar transactions. Risk financing instruments can assure governments of sufficient post-disaster capital to provide emergency response, disaster relief to the affected population and repair public infrastructure. The costs of financial instruments, however, can greatly exceed expected losses, and for this reason it is important to closely examine their benefits and alternatives. This paper analyzes the Mexican case from the perspective of the risk cedent (the Ministry of Finance and Public Credit), which was informed by analyses provided by the International Institute for Applied Systems Analysis (IIASA). The rationale for a government to insure its contingent liabilities is presented along with the fiscal, legal and institutional context of the Mexican transaction. Using publicly available data, the paper scrutinizes the choice the authorities faced between two different risk-transfer instruments: reinsurance and a catastrophe bond. Making use of IIASA's catastrophe simulation model (CATSIM), this financial risk management decision is analyzed within the context of a public investment decision. r

- by Georg Pflug
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- Management, Public Finance, Disaster risk management, Financial Risk Management

Gli autori prendono le mosse dalla risoluzione del Parlamento Europeo dal titolo «Norme di diritto civile sulla robotica. Risoluzione del Parlamento europeo del 16 febbraio 2017 recante raccomandazioni alla Commissione concernenti norme di diritto civile sulla robotica (2015/2103(INL))» per constatare come la prima presa di posizione forte di un’autorità europea sulla necessità di introdurre norme efficaci in tema di robot ed intelligenza artificiale metta in luce tutte le contraddizioni di carattere giuridico, etico ed economico relative all’introduzione massiccia di tali tecnologie nella vita di tutti i giorni.

- by Antonio Furlanetto
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- Robotics, Artificial Intelligence, Risk Management, Law and Ethics

In recent years there has been a growing stream of research focusing on cyber-insurance. Risk transference with insurance has been suggested by both practitioners and academics to absorb losses caused by security breaches as well as to supplement the existing set of security tools to manage IT security residual risk after IT security investments are made. In this paper, we investigate pricing of cyber-insurance products using the emerging copula methodology for modeling dependent risks from an actuarial approach which is different to the process approaches of Bohme and Kataria (2006) and Mukhopadhyay et. al. (2006). We discuss a framework for assessing the empirical dollar loss distribution from the empirical distribution of the number of infected computers. We develop a cyber-insurance model and demonstrate the Gumbel copula to price insurance premiums using a numerical example with ICSA data.

- by Hemantha Herath
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- Information Security, Risk Management, Key words, IT Security

The financialisation of strategies, as mentioned in the introduction, may be correlated with the dominant link between investment and funding. The principle of selection no longer seems to focus essentially on investment funding methods,... more

- by Gabriel Colletis
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- Property Rights, Resource Allocation, Profitability, Business Model

The paper focuses on the traditional and alternative mechanisms for insurance risk transfer that are available to global as well as to domestic insurance companies. The findings suggest that traditional insurance risk transfer solutions available to insurance industry nowadays will be predominant in the foreseeable future but the increasing role of alternative solutions is to be expected as the complementary rather than supplementary solution to traditional transfer. Additionally, findings suggest that it is reasonable to expect that future development of risk transfer solutions in Serbia will follow the path that has been passed by global insurance industry.

- by Prof. Vladimir Njegomir, PhD
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- Risk Transfer, Reinsurance

This paper aims to provide inspiration for how risk transfer tools such as insurance can facilitate approaches to address loss and damage associated with the impacts of climate change including slow-onset events. In particular it aims to show how insurance can be used in conjunction with a wide set of climate risk management tools to bolster societal resilience. The paper offers an overview of slow-onset climatic processes, provides a description on the current innovative tools and approaches to help reduce loss and damage associated with slow onset events provides case studies, and discussed some of the gaps and challenges related to implementation and enabling environment needed to manage climate risks in developing countries.

The report makes a general assessment of the need for catastrophe risk transfer in Latin America and the Caribbean. It analyzes different ways in which risk transfer can take place in the form of conventional reinsurance contracts as well... more

- by Torben Juul Andersen
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- Financial Risk Management, Disasters, Natural disaster, Risk Transfer

Globally, the weather related extreme events and associated loss and damages (L&D) have increased significantly. With of high confidence, the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC AR5) published in 2014 stated that the risks associated with those extreme weather events will further increase, putting disproportionate burden of climate stress and associated losses to the most vulnerable poor countries and communities. In the face of growing weather extremes and associated L&Ds, the global policy stakeholders at the UNFCCC negotiation have long been in discussion for agreeing a comprehensive ‘multi-window mechanism’ for addressing L&D, however the differentiated political position on the demand for ‘loss compensation’ from the historical liability context of the developed countries made the process considerably delayed. It’s only in 2007, the 13th Conference of the Parties (COP 13) of the UNFCCC included L&D as an agenda item, roughly 16 years later since the issue was first raised in 1991 at the 46th General Assembly of the United Nations. Over the years, the developed country group denied any discussion despite the L&D had started to manifest; they also had long been able to hinder any progress in L&D negotiations as they feared to be held liable for causing L&Ds and compensate those. Despite strong opposition of the developed countries, the negotiation on L&D got significant momentum since COP 13; however, major progress achieved at COP 21 where the country Parties included a stand-alone article in the Paris Agreement (PA), with the provision of enhanced action and support, and approaches e.g. risk reduction, risk sharing, and risk transfer, and rehabilitation for addressing L&DS. Though, the pre-Paris COP negotiations emphasized for a comprehensive ‘all inclusive’ mechanism, the post-Paris COP negotiations provided utmost focus on a ‘all alone’ mechanism e.g. insurance for addressing L&D. For instance, among three different but interconnected approaches, climate risk sharing and risk transfer has become the priority concern with increased financial commitment and support primarily by the G7 and G20 country group who find ‘insurance’ apparently as an ultimate solution of addressing L&Ds. At COP 23 in 2017, the G20 countries launched their climate risk finance ‘the InsuResilience Global Partnership for Climate and Disaster Risk Finance’ also established a Multi-donor Trust Fund (MDTF) under the administering authority of the GFDRR/World Bank Group to implement the InsuResilience initiative. Despite the opportunities the climate risk insurance (CRI) provide, they are not appropriate for addressing longer-term foreseeable risks like sea-level rise and desertification, also the CRI may not cover the predictable L&Ds that the poor share-croppers and marginalized smallholders in the developing countries face almost in every year. There are less evidences that poor smallholders pay insurance premiums; it’s neither affordable by the smallholders, not justifiable to ask them to pay premiums. In many countries misconception on the risk transfer mechanisms exists, many of them still lack an appropriate regulatory framework for introducing CRI. In many places, people consider insurance as a mechanism that would deceive them, they also consider insurance too expensive. Therefore, CRI should not be considered as an ‘all alone’ solution as it has many structural limitations and setbacks. For instance, CRI could not be applied in transferring.

The growing cost and frequency of natural catastrophes and their implications for economic growth and development have led to a concern over the level of public awareness and education relative to largescale catastrophes and disaster risk reduction measures. Public awareness and education of disaster risk reduction are, in particular, increasingly acknowledged as important components of effective risk management of natural catastrophes. The financial component of disaster risk management and mitigation strategies, involving risk transfer and compensation strategies, is also recognized as being important for reducing the financial impact of catastrophes on individuals, businesses, and governments, and permitting more rapid economic and social recovery. As such, systematic promotion of public awareness and education of risks and risk reduction measures, including financial loss-sharing and risk transfer tools, is an important aspect of national and international strategies to reduce vulnerability and losses from catastrophic events.

The Risk Management Index, RMI, proposed in this paper, brings together a group of indicators that measure risk management performance and effectiveness. These indicators reflect the organizational, development, capacity and institutional actions taken to reduce vulnerability and losses in a given area, to prepare for crisis and to recover efficiently from disasters. This index is designed to assess risk management performance. It provides a quantitative measure of management based on predefined qualitative targets or benchmarks that risk management efforts should aim to achieve. The design of the RMI involved establishing a scale of achievement levels or determining the distance between current conditions and an objective threshold or conditions in a reference country, sub-national region, or city. The proposed RMI is constructed by quantifying four public policies, each of which is described by six indicators. The mentioned policies include the identification of risk, risk reduction, disaster management, and governance and financial protection. Risk identification comprises the individual perception, social representation and objective assessment; risk reduction involves the prevention and mitigation; disaster management comprises response and recovery; and, governance and financial protection policy is related to institutionalization and risk transfer. Results at the urban, national and sub-national levels, which illustrate the application of the RMI in those scales, are finally given.

- by Omar D Cardona and +2
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- Psychology, Decision Making, Disaster risk management, Natural Hazards
- by Marie Poupinel
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- War Studies, Iraq War, Security and Peace Studies, Risk Transfer

The forbidden bay'u al-gh arar can best be translated as "trading in risk". In the face of risk, any trade would involve some degree of trading in risk, and thus jurists disagree over whether a specific contract is forbidden or not based on their varying assessments of whether the amount of risk is substantial or small. Moreover, the prohibition is often overruled in cases where clear economic benefit can only be served by a contract which includes substantial trading in risk.

- by As Syams
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- Risk sharing, Risk Transfer, Economic Efficiency, Economic Benefit

The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and... more

- by Oksana Khadarina
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- Risk Management, Financial System, Risk Transfer, Financial Risk
- by Anil Sawhney
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- Supply Chain, Construction Industry, Case Study, Commodity prices

The agriculture sector is a vital part of Sri Lanka’s economy and provides employment for approximately a quarter of the country’s workforce. However, the sector is facing increasing climate risks that affect crop yields, livestock production, livelihoods, health, wellbeing, and lives of smallholder farmers, supply chain actors, and rural communities. This research conducted by SLYCAN Trust aims to identify key indicators to assess and track the resilience of farming households as well as the impact of risk management, risk transfer, and risk finance interventions. These key indicators for livelihood resilience profiles have been developed through a scoping survey, in-depth interviews, and a participatory consultation process.

- by Dennis Mombauer
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- Climate Change, Resilience, Food Systems, Disaster risk management

, we study the main incentive issues and the form of optimal contracts for Public Private Partnerships (PPPs) in transports. We present a basic model of procurement in a multitask environment in which a risk-averse firm chooses unobservable efforts in infrastructure and service quality. We begin by analyzing the effect on incentives and risk transfer of bundling building and operation into a single contract. We consider the factors that affect the optimal allocation of demand risk and their implications for the choice of contract length. We discuss the dynamics of PPP contracts and how the risk of regulatory opportunism affects contract design and incentives. JEL Classification: D8, H54, H57, L5, L91.

- by David Martimort
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- Service Quality, Transport, Risk Aversion, Risk Transfer

Rather than in terms of the inevitable demise of a destabilising process of speculation, this article explores the ‘credit crunch’ as a window on the fabrication, and measure of the proportions of a political shift driven by market actors and financial innovation. The Basel process reconceptualised banks as risk navigators and generated a competitive hierarchy within the global banking industry determined on a gauge of this capacity. This private regulatory regime promoted market inflation and rendered institutional liquidity and risk transfer definitive of market power. In turn, a ballooning credit derivatives market broke the limits of financial production and defined state actions in the face of crisis. A shift from a central concern with solvency to that of liquidity thinly masks a profound redistribution of power from the public to the private. By swapping private assets of uncertain value for government bonds, central banks have effectively recognised that the products of innovation in the private sphere are global money. The state is in a curious bind. It takes on limitless exposure to private liabilities while its reform agenda is constrained to calling for greater levels of transparency and tackling the worst excesses. Promises of substantive reform remain only that, reflecting dissonance between reality and an entrenched faith in a progressive innovation spiral.

- by Duncan Wigan
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- Political Science, Economic Theory, Risk Transfer, Banking Industry
- by David Satterthwaite and +2
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- Risk Transfer

Insurance is a prominent, well-established mechanism for risk transfer in developed countries. While North American governments have stalled on both mitigation of and adaptation to climate change, the insurance industry (globally and in North America) is already viewing recent catastrophic events as being partially climate change related and exploring new adaptation initiatives. In general, the intent of these initiatives is to assure the prosperity of the insurance sector, not to prevent damage to life and property. Reliance by insurers on predictive risk modelling continues to be limited as new initiatives are prompted by extreme events rather than modelled projections of damage. As another example of reactive behaviour, insurers rely on legal judgments to determine the extent of their liabilities. Understanding this pattern of learning and response has two implications. First, opportunities for anticipatory adaptation prompted by insurer initiatives are very limited; guaranteeing continued large losses from extreme events into the future. Second, pro-active risk mitigation will have to be pursued and implemented on behalf of public welfare by the relevant branches of government and cannot be left to market forces.

- by Christina Cook and +1
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- Climate Change, Risk Management, Global change, Developing Country
- by Margaret Tarpley
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- Surgical Education, Risk Transfer, Clinical Sciences, Curriculum and Pedagogy

Disaster risk is most detailed at a micro-social or territorial scale. As we aggregate and work at more macro scales, details are lost. However, decision-making and information needs at each level are quite different, as are the social actors and stakeholders. This means that appropriate evaluation tools are necessary to make it easy to under- stand the problem and guide

- by Janet Roitman and +1
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- Insurance and reinsurance, Private Equity, Social Studies of Finance, Risk Transfer

The paper looks at the phenomenon of reinsurance sidecars, as an example of innovation in cross-sectoral risk transfer between the insurance and the capital markets. It explores the emergence, unfolding and retreat of sidecars in Bermuda with the goal of identifying and establishing key issues shaping how supervisors make sense and act upon innovative industry practices. The paper describes key market and industry features setting the scene for the emergence of sidecars, reviews the literature on sidecars, discusses supervisory challenges sidecars present and explores avenues for addressing these challenges. The paper argues that sidecars offer a fertile ground for better understanding the relationship between industry and supervisors in a context of innovation taking place in a rapidly changing landscape, populated by global players.

- by Marcelo Ramella
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- Risk Transfer, Capital Market
- by mude net
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- Economics, Risk Management, Risk Transfer, Low Income Countries

While significant progress in microcredit and microfinance has been made in low-income countries, lending for small farming enterprises has been limited. This article reviews how innovative Index-based Risk-Transfer Products (IBRTPs) can be used to transfer the correlated natural disaster risks that often hamper the development of farm-level microcredit. By linking lending to IBRTPs, access to microcredit can be enhanced while also providing opportunities to offer mutual sharing of the basis risk that remains after correlated risks are transferred into global markets. This opens the way for new thinking about developing agricultural insurance in low-income countries.

- by Barry Barnett
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- Disaster risk management, Natural disaster, Risk Transfer, Agricultural Finance

- by Dale Gray
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- Public sector, Corporate Restructuring, Credit Risk, Default Risk

- by Hemantha Herath
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- Information Security, Risk Management, IT Security, Risk Transfer

Articoli e saggi Appunti su revisione del piano economico-finanziario e rideterminazione delle condizioni di equilibrio delle concessioni ai tempi della crisi sanitaria emergenziale Amedeo Vitiritti * Sommario: 1. Concessioni e impatto economico della pandemia da Covid-19.-2. Rischio di domanda in assenza di condizioni operative normali e incisione dell'equilibrio economico-finanziario delle concessioni.-3. Le coordinate ermeneutiche della revisione del Pef: «rideterminazione delle condizioni di equilibrio» in «permanenza dei rischi trasferiti».-4. I limiti alla revisione del Pef: «alterazione delle condizioni di equilibrio a favore del concessionario» e «natura generale della concessione», nel prisma dell'eccessiva onerosità sopravvenuta.-5. Per concludere: le modalità di rideterminazione delle condizioni di equilibrio del Pef e il vincolo della «reale esposizione alle fluttuazioni di mercato» e alle potenziali perdite.

- by Amedeo Vitiritti
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- Risk Transfer, Public Procurement Law, Concessions, Concessioni

In this paper we analyze whether the use of credit risk transfer instruments affects the risk taking of large, international banks. Relying on a unique data set of European collateralized debt obligations (CDOs), we find that the issue of CDOs tends to raise the systematic risk (equity beta) of the issuing bank. We also perform a cross-sectional analysis to identify determinants of the change in systematic risk, and find that equity beta rises significantly more if the issuing bank is financially weak (low profitability and high leverage), and if it is domiciled in a bank-based financial system. Overall, our findings suggest that credit securitization goes handin hand with an increase in the risk appetite of the issuing bank. Our findings are also relevant for understanding the financial stability implications of credit securitizations.

- by Jan Krahnen
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- Risk Taking, Event Study, Risk Transfer, Systemic Risk

- by Oksana Khadarina
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- Risk Management, Financial System, Risk Transfer, Financial Risk

- by Joanne bayer
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- Management, Public Finance, Disaster risk management, Financial Risk Management

Insurance companies are a prominent mechanism for risk transfers. Many initiatives are looking toward private–public partnerships and new risk-management instruments to provide a cushion for climate change-related effects. For this aspiration to be fulfilled, insurers and institutions within which they operate need to learn about emergent risks and develop workable strategies. We explore three factors shaping the evolution of insurance practices - quantitative models of catastrophic loss, experience of catastrophic loss, and outcomes of litigated cases. We use the available evidence to assess the importance of each of these factors in how the industry is evolving and, hence, what actual risk reductions and transfers are more likely in the future.

- by Hadi Dowlatabadi
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- Climate Change, Risk Management, Risk Transfer, Risk Reduction

Innovative micro-insurance schemes can be one tool to help African small-holder farmers cope with climate variability and change. A critical challenge for implementing such risk transfer programs, however, is helping participants understand how insurance operates, and there is evidence that farmers with a poor understanding of insurance are less likely to use it. One of the proposed tools to help farmers understand insurance is a simulation game, through which farmers can gain first-hand experience with a functioning insurance market. This paper reports on the results of experiments in Ethiopia and Malawi, investigating farmers' understanding and the effectiveness of a role-playing game at improving that understanding. Our results suggest a generally poor understanding of basic insurance concepts, and are consistent with past results in suggesting that better understanding correlates with greater willingness to purchase it. Our results also suggest that role-playing games may be an important tool for improving understanding, but that they do not necessarily out-perform more conventional training practices. ß

Food security is expected to face increasing challenges from climatic risks that are more and more exacerbated by climate change, especially in the developing world. This document lists some of the main capabilities that have been recently developed, especially in the area of operational agroclimatology, for an efficient use of natural resources and a better management of climatic risks. Many countries, including the developing world, now benefit from well-trained staff in the use of climate data, physical and biological information and knowledge to reduce negative climate impacts. A significant volume of data and knowledge about climateagriculture relationships is now available and used by students, scientists, technicians, agronomists, decision-makers and farmers alike, particularly in the areas of climate characterization, land suitability and agroecological zoning, seasonal climate forecasts, drought early warning systems and operational crop forecasting systems.

- by Bernard Tychon and +1
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- Remote Sensing, Climate Change, Climate variability, Energy Policy

Hedging operations acquire macroeconomic significance with the expansion of financial derivatives. The specification of the concept of such operations of risk transfer leads to modifications in the concept of speculation. Arbitrage operations intensify, but their frontiers with speculation are not always clear. Both make intense use of leverage which can result in heavy losses.

- by Maryse Farhi
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- Financial Markets, Financial Derivatives, Speculation, Leverage

The likely imposition by regulators of minimum standards for capital to cover 'other risks' has been a driving force behind the recent interest in operational risk management. Much discussion has been centered on the form of capital charges for other risks. At the same time major banks are developing models to improve internal management of operational processes, new insurance products for operational risks are being designed and there is growing interest in alternative risk transfer, through OR-linked products.

- by Carol Alexander
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- Operational Risk, Risk Transfer, Driving force

Large banks often sell part of their loan portfolio in the form of collateralized debt obligations (CDO) to investors. In this paper we raise the question whether credit asset securitization affects the cyclicality (or commonality) of bank equity values. The commonality of bank equity values reflects a major component of systemic risks in the banking market, caused by correlated defaults

- by Jan Krahnen
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- Capital Structure, Risk sharing, Risk factors, Risk Transfer
- by Barry Barnett and +1
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- Economics, Risk Management, Risk Transfer, Low Income Countries

This paper presents a preliminary study of public bodies' perceptions relating to risk transfer in the UK private finance initiative (PFI). The study is based on semi-structured interviews conducted during the period from April to October 2002 at three public bodies which had used PFI to finance capital projects located in Scotland, Wales and England. Overall there is a mixture of impressions from the interviewees on attitudes to risk transfers and how risks were quantified in decisionmaking. The study reveals that PFI has definite advantages over conventional contractual and financing arrangements for public sector projects in a number of areas. However, these advantages do not predominately derive from risk transfer as generally suggested by the UK government. The client-contractor split, rather than risk transfer, was seen as being in many ways the most beneficial feature of the PFI. Given the lack of experience and expertise of public sector bodies in assessing and valuing risks, more training of risk management in procurement is clearly needed for public sector managers.

- by Morrison Handley-Schachler
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- Finance, Private Finance Initiative, Risk Transfer

Some of the features of public private partnerships (PPPs) are outlined. The arguments that PPPs provide additional investment are critical examined, and the way in which the accounting treatment may influence the use of PPPs examined. The costs of PPPs are compared with ‘conventional’ public investment and it is argued that PPPs are a relatively expensive way of undertaking public

Uprkos širokoj upotrebi, ocjeni rejting agencija i velikom prometu, tržiše kreditnih derivata se i dalje smatra novim i nedovoljno istraženim. S druge strane, jačanje finansijske krize iz 2008. godine se ne može u potpunosti pripisati upotrebi kreditnih derivata, iako su oni imali značajnu ulogu u širenju krize. Iako su Zakonom o tržištu kapitala predviđeni finansijski derivati, na tržištu kapitala u Bosni i Hercegovini još nisu korišteni kreditni derivati. S tim u vezi, ozbiljni autoriteti u oblasti finansijskog menadžmenta zagovaraju upotrebu kreditnih derivata za transfer kreditnog rizika jer se tako mogu značajno smanjiti iznosi gubitaka u slučaju nastanka kreditnog događaja. Ova mogućnost dobija na značaju nakon šoka uzrokovanog pandemijom koronavirusa. U radu ispitujemo hipotezu po kojoj postoji značajan prostor za inovacije na domaćem tržištu kapitala. Pokazali smo da je moguće i poželjno uvođenje kreditnih derivata na tržište te navodimo domete i ograničenja ali i identifikujemo prepreke uvođenje ovakvih inovacija.

- by Miloš Grujić
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- Investments, Risk Transfer, Credit derivatives

Anthropogenic greenhouse gas emissions are changing the Earth's climate and impose substantial risks for current and future generations. What are scientifically sound, economically viable, and ethically defendable strategies to manage these climate risks? Ratified international agreements call for a reduction of greenhouse gas emissions to avoid dangerous anthropogenic interference with the climate system. Recent proposals, however, call for the deployment of a different approach: to geoengineer climate by injecting aerosol precursors into the stratosphere. Published economic studies typically suggest that substituting aerosol geoengineering for abatement of carbon dioxide emissions results in large net monetary benefits. However, these studies neglect the risks of aerosol geoengineering due to (i) the potential for future geoengineering failures and (ii) the negative impacts associated with the aerosol forcing. Here we use a simple integrated assessment model of climate change to analyze potential economic impacts of aerosol geoengineering strategies over a wide range of uncertain parameters such as climate sensitivity, the economic damages due to climate change, and the economic damages due to aerosol geoengineering forcing. The simplicity of the model provides the advantages of parsimony and transparency, but it also imposes severe caveats on the interpretation of the results. For example, the analysis is based on a globally aggregated model and is hence silent on the question of intragenerational distribution of costs and benefits. In addition, the analysis neglects the effects of endogenous learning about the climate system. We show that the risks associated with a future geoengineering failure and negative impacts of aerosol forcings can cause geoenginering strategies to fail an economic cost-benefit test. One key to this finding is that a geoengineering failure would lead to dramatic and abrupt climatic changes. The monetary damages due to this failure can dominate the cost-benefit analysis because the monetary damages of climate change are expected to increase with the rate of change. Substituting aerosol geoengineering for greenhouse gas emission abatement might fail not only an economic cost-benefit test but also an ethical test of distributional justice. Substituting aerosol geoengineering for greenhouse gas emissions abatements constitutes a conscious risk transfer to future generations. Intergenerational justice demands distributional justice, namely that present generations may not create benefits for themselves in exchange for burdens on future generations. We use the economic model to quantify this risk transfer to better inform the judgment of whether substituting aerosol geoengineering for carbon dioxide emission abatement fails this ethical test.

- by Marlos Goes
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- Climate Change, Multidisciplinary, Abrupt Climate Change, Economic Impact

This study explores the impact of changes occurring in financial markets on national sovereignty. Sovereignty involves both the authority to rule and the capacity to exercise this rule. Changes now occurring in financial markets and their most important institution, banks, present challenges to sovereignty. Domestic challenges include consolidation, conglomeration, automation, reduction of government banking, disintermediation, and the development of risk transfer markets and mechanisms. International challenges include freeing capital inflows and outflows, foreign control of financial service institutions, regional and supranational economic integration, and the abandonment of national currencies. These often create a web of obligations that may compromise national sovereignty. While sovereignty may not be viewed as absolute in terms of national priorities, and may be in a constant state of negotiation, it is a measure of national strength. Its infringement may produce resentments and dissatisfactions among international agents and within national political structure and render a toll on national growth and development.

- by Walter Ness
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- Economics, Economic integration, Financial Markets, Emerging Market