Islandiako ekonomiari buruzko tesi on bat

Hona hemen Olafur Margeirsson1-en tesia: Financial Instability and Foreign Direct Investment







What is post-Keynesian economics?

The construction of the thesis and its contribution to knowledge

Chapter 1 – Foreign Direct Investment: a focused literature review

FDI and economic growth

Technological spillovers and growth

Increased competition and economic growth

Labour force and economic growth

FDI, trade and economic growth

Domestic policies and economic growth

Attracting FDI

FDI and other types of capital flows

FDI and the balance of payments

The origin of funds for FDI

The effects on the balance of payments

FDI and financial stability

Conclusion to chapter 1

Chapter 2 – FDI in financial services and its uniqueness

What do banks do?

Banks and the payment system

On money, credit and banks

Banks as intermediaries

Specific issues on FDI in banking

FDI in banking, financial development and economic growth

Some reasons why banks go abroad and where they go

The Unique Effects of Investment Activity in Financial Services

The central position of the financial sector in the economy

The unique use of banks’ product (credit)

The (possible) unique self-supporting mechanism of banking-FDI

Contagion risks from financial-FDI

Financial-FDI, credit availability, credit stability and capital flows

A focus case: Standard Chartered

Conclusion to chapter 2 

Chapter 3 – Financial stability

Defining and measuring financial stability

Defining financial stability

Measuring financial (in)stability

Why is financial stability important?

Investment levels and financial stability

The origin of financial instability: Minsky’s view

Minsky’s Financial Instability Hypothesis

The nature of the cash flows within the economy

Minsky’s hedge, speculation and Ponzi units 

The effects of speculation and Ponzi units

Applying Minsky’s FIH to measure financial stability

The appropriate use of two time horizons

“Short term” financial stability 

“Long term” financial stability

The clash between long term and short term financial instability

Conclusion to chapter 3

Chapter 4 – Methodology, Data and Results

The construction of the indices

The Hakkio & Keeton methodology and the expansions made 

Some notes on the methodology

Data availability 

The indices

Do the indices tell us anything useful?

The FDI data and the necessary changes to the indices


Annual data

Quarterly data

Conclusion: where from here?

Chapter 5 – A Suggestion, Part I: On Credit 

FDI, credit expansion and financial stability

FDI and credit expansions

Credit expansion and some of its effects

Domestic credit expansion and current account deficits

Domestic credit expansion and the depletion of foreign reserves

Domestic credit expansion and inflation

Domestic credit expansion and devaluation of the currency

Controlling credit

Central bank credit controls

Credit controls’ pros and cons: selected issues

Official take-over of credit creation (“debt-free money”)

Debt-free money’s pros and cons: selected issues

A Suggestion, Part II: The OERS monetary system

4 Introduction

The basic functionality of the system: the OERS

The banks’ profit maximisation problem in the OERS

Banks and the exchange rate in the OERS

Banks, the inflation and the unemployment

A graphical representation of the regulatory DFX surface

Why those foundations?

The foreign reserves base

Inflation, employment and the exchange rate

Fiscal activity

Deficit-spending by the government: how it incentivises the banks

Public debt, its management and the rate of interest

On the governors of the system

A note on capital flows in the proposed system

Capital flows and banks’ profit incentive

The behaviour of capital flows in the system as proposed

Selected issues and problems

Simultaneously low unemployment and low inflation

Can banks spend other banks’ foreign reserves?

Will banks stop lending at home?

Responsibly sharing the power to create money

Will the government misuse its power to deficit-spend?

The deal

An empirical case: Croatia

Conclusion to chapter 5


Policy implications of this work

Where from here: the next steps in research

Appendix 1

Appendix 2 – Reasoning for the selection of indicators

Indicators in the short term index

Income-flow covered balance sheet flow

Portfolio-flow covered balance sheet flow 

Behavioural factors 

Indicators in the long term index

Appendix 3 – Data Appendix

UK tables

US tables

Net FDI data

Appendix 4



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1 Olafur Margeirsson is a Research Scholar at the Binzagr Institute for Sustainable Prosperity. He finished his PhD in economics (“Financial Instability and Foreign Direct Investment”) from the University of Exeter (UK) in 2014, previously having earned Dean’s Commendation and The Philip Norman Memorial Prize for his MSc. Money & Banking studies at the same university. He worked as a Junior Economist at Kaupthing Bank Research Department in Reykjavik before the fall of the Icelandic financial system. He has repeatedly assisted policy makers in his home country, Iceland, on policy matters concerning financial stability and consumer finance. His views have been projected by the Icelandic and international media alike, including the Financial Times and Le Monde. Research interests include real estate; banking; monetary history, policy and developments; financial crises; and sustainable development, in particular in relation with energy and real estate. Olaf lives and works in Switzerland.

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