A Conceptual Framework for Transitioning to an Authentic Sustainable World

Othmane Benmoussa

In this article, using the ESIMOP / PROMISE framework of Roberto Rigobon and systems thinking concepts, we propose a dynamic systems perspective, to raise questions about the processes of change that are required, on multiple scales.

Based on this way of thinking, the example of COVID-19 episode highlights more than ever the critical need to find a clever equilibrium between human activity (in its several forms) and the Earth’s ability to cope, giving due consideration to the resulting general implications.

Bank Capital and the Cost of Equity

Mohamed Belkhir, Ralph Chami, Sami Ben Naceur, Anis Samet

Using a sample of publicly listed banks from 62 developed and developing, including MENA, countries over the 1991-2017 period, we investigate the impact of capital on banks’ cost of equity. We report the highest median cost of equity in Lebanon with 25.1%. Consistent with the theoretical prediction that more equity in the capital mix leads to a fall in firms’ costs of equity, we find that better capitalised banks enjoy lower equity costs. Our baseline estimations indicate that a 1 percentage point increase in a bank’s equity-to-assets ratio lowers its cost of equity by about 18 basis points. Our results also suggest that the form of capital that investors value the most is sheer equity capital; other forms of capital, such as Tier 2 regulatory capital, are less (or not at all) valued by investors. Additionally, our main finding that capital has a negative effect on banks’ cost of equity holds in both developed and developing countries. The results of this paper provide the missing evidence in the debate on the effects of higher capital requirements on banks’ funding costs.

Global Value Chains – Participation and Development Opportunities: Hints from the Product Space

Giorgia Giovannetti, Giulio Vannelli

The Economic Complexity (EC) approach (Hidalgo and Hausmann 2009) offers a path-breaking perspective into the study of economic development, by introducing new tools for economic analysis, such as the product space and sophistication indexes. A different strand of international economics literature has studied Global Value Chains (GVCs), highlighting their impact on countries the economic performance of countries. This paper jointly considers these two strands of literature by: i) providing a descriptive analysis on a set of selected chains through updated measures of the product space and of derived indexes; ii) proposing a new EC coherent GVC participation index; iii) applying the former contributions to the analysis of North African countries’ GVC performance. From the latter analysis, strong differences between Tunisia, Egypt and Morocco emerge, as far as both current participation and future perspectives are concerned. Overall, the paper, by merging the two strands of literature, for the first time to our knowledge, highlights interesting opportunities for further developments in this direction.

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