Conference Program

At the beginning of 2023 the world witnessed a series of bankruptcies of major financial institutions in the U.S.: Signature Bank, Silicon Valley Bank, First Republic Bank. Then the banking crisis spread to Europe. In March 2023 CreditSuisse - the second largest bank of Switzerland - stood on the verge of spectacular bankruptcy. Only the extremely fast acquisition by rivaling Swiss bank UBS enforced by Finma, Swiss central bank and Swiss Ministry of Finance prevented the financial catastrophe.

However, the Western financial system is in practice doomed to a spectacular demise, which probably will take place in the spring of 2024, because of numerous and very serious malpractices and outright frauds accumulated over the years. What we witnessed in 2023 is just first stones of much wider and much more powerful financial avalanche that soon will strike the West provoking cascading bankruptcies of different financial entities. That will vastly transform the international financial system. On top of that, a new competening and alternative for the U.S. dollar currency is on the horizon. There are plans of creating BRICS+ currency, which would undercut the preeminent dollar position in the global economy.

One may get an impression that we are presently witnessing the progressing disintegration of the world on two opposing political and economic camps – Western led by the U.S. and Eastern led by China. In the nearest years this proces will certainly gain momentum accelerated by the reinvigorated efforts toward dedollarization advanced in many of the BRICS+ states.

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International development banks are primary actors in the funding of regional development projects. They are pivotal pillars in the international monetary system assisting transregional commercial, energy and infrastructure integration. Research suggests: international development banks respond differently to systemic financial risk (SFR), posed by various instability factors. This paper compares the response strategies of the Asian Development Bank (ADB) and the European Bank for Reconstruction and Development (EBRD) to systemic financial risk (SFR). We review these banks’ policies toward intergovernmental recipients of their funds, resp. the Central Asian Regional Economic Cooperation program (CAREC); and the Transport Corridor Europe, Caucasus, Asia program (TRACECA).

Our hypothesis suggests: the established global financial safety nets (GFSN) protect regional cooperation programs from failure. Our findings simultaneously confirm and falsify this hypothesis. (1) The ABD developed a successful financial safety net (FSN) in funding of the CAREC project. It aimed at states’ economic and financial stability and targeted governments and banks. Alternatively, (2) The ERBD has encouraged private investments in TRACECA. By overlooking geopolitical risk this strategy led to loss of funds as the result of large infrastructure destruction in the Russo - Ukraine war.

In conceptual terms, this project contributes to the issue of how we approach the “order within the International Monetary System” (German, 1997). We discuss “the implications of having credit organized in a particular way”: Looking at “the availability of long-term credits” through the eyes of “private monetary actors”, we question the security of their assets released through “the system of international clearance”.

The 2021-2022 Human Development Report indicates that we live in the uncertain times. Over three years after the outbreak of the COVID-19 pandemic, institutions of global economic governance struggle to cope efficiently with multiplying challenges. In addition to the ongoing pandemic and disastrous effects of the war in Ukraine, the economic situation of many countries has deteriorated due to the rising levels of sovereign debt resulting in a potential wave of sovereign default episodes. As the contractual international sovereign bankruptcy regime is missing, over decades sovereign debtors and their creditors resorted to sovereign debt governance mechanisms based on soft law, public-private collaboration, and informal governance mechanisms. Yet the current situation with new types of sovereign debt instruments and new landscape of debtor-creditor relations (e.g., restructuring Chinese debts of African states) puts the ability of the present debt restructuring architecture to cope with the debt crises in question. Hence, the paper aims at reviewing the ongoing transformation of global sovereign debt governance. It provides an overview of current debt restructuring techniques and attempts to regulate sovereign bankruptcy at the international level, as well as presenting the recent challenges to the sovereign debt governance system.

Illicit money implies transnational transactions involving hidden flows, such as phantom investment, that deprive developing countries of domestic resources for development, but also pose a continuing challenge for sustained growth, governance, and effective social justice. This negative influence of illicit money contrasts with the role of foreign aid, which is seen as beneficial to countries in the Global South. However, it is still unclear empirically to what extent the interplay between aid and phantom investment influences income inequality. Moreover, how these two financial flows interact with the institutional setting to affect balanced development and inequalities is yet to be understood. This is of particular importance, as inequality is strongly related to elite capture, creating a vicious circle of increasing inequalities with rising incomes for a small elite that manages to reap the benefits from illicit money and foreign aid. In contrast, the rest of the population is left behind or even made worse off. This paper assesses the effects of phantom investment and foreign aid on inequality in the Global South, focusing on their interaction using a standard two-way fixed-effects model and the System-Generalized Methods of Moments. The results show that phantom investment tends to worsen inequality, especially in countries that depend heavily on foreign aid.