Matching risks with instruments in development banks

Griffith-Jones, Stephany, Spiegel, Shari, Xu, Jiajun, Carreras, Marco and Naqvi, Natalya ORCID: 0000-0003-0821-070X (2022) Matching risks with instruments in development banks. Review of Political Economy, 34 (2). 197 - 223. ISSN 0953-8259

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Abstract

This paper explores how development banks should deploy appropriate financial instruments to encourage real economic risk-taking while minimizing financial engineering risks. We distinguish real economic risks from financial engineering or intermediary risks and argue that using complex financial instruments to leverage additional private financing may undermine policy steer and lead to too much risk being taken by development banks. We then explore comparative advantages of different financial instruments such as loans, guarantees, equity, and insurance in tackling risks in normal times. Then we synthesize common features of development banks’ responses to the COVID-19 crisis. Finally, we propose future research directions.

Item Type:	Article
Official URL:	https://www.tandfonline.com/journals/crpe20
Additional Information:	© 2021 Informa UK Limited, trading as Taylor & Francis Group.
Divisions:	International Relations
Subjects:	H Social Sciences > HG Finance H Social Sciences > HC Economic History and Conditions
JEL classification:	G - Financial Economics > G2 - Financial Institutions and Services > G23 - Pension Funds; Other Private Financial Institutions H - Public Economics > H8 - Miscellaneous Issues > H81 - Governmental Loans, Loan Guarantees, and Credits O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O16 - Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q0 - General > Q01 - Sustainable Development D - Microeconomics > D0 - General > D02 - Institutions: Design, Formation, and Operations
Date Deposited:	11 Mar 2022 14:48
Last Modified:	17 Apr 2024 20:27
URI:	http://eprints.lse.ac.uk/id/eprint/114329

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