Author Archives: Aleksandr Gevorkyan

About Aleksandr Gevorkyan

Dr. Gevorkyan is the author of Innovative Fiscal Policy and Economic Development in Transition Economies (Routledge, 2013 & 2011) and the editor and translator of How Did I Survive? (Cambridge Scholars Publishing, 2008).

DiasporaBond

Some quick (and really draft) notes on the #DiasporaBond idea that’s been discussed recently. The notes are based on my 2008 paper (see below). These are draft notes outlining general principles of a potential program – more certainly can be added.

Aleksandr V. Gevorkyan (July 31, 2018)

  • DiasporaBond in strict sense is a financial debt instrument, by which a country borrows from its expatriate (diaspora) community (affiliated by ethnic, religious, cultural, or other characteristics).
  • BENEFIT-1: a small economy with large diaspora is able to tap into international capital markets, otherwise closed off to the country or outcompeted by similar but stronger economies (what’s happening in #EmergingMarkets these days).
  • BENEFIT-2: borrowing at patriotic discount, i.e. borrowing at interest rates lower than would be borrowing in a competitive.
    • The reason: “diaspora” is assumed to be more altruistic in its intentions towards historical homeland and is willing to buy-in at a discount driven by patriotic motives
  • BENEFIT-3: potentially a substantial economic development booster

And some points to “consider”:

  • As a capital market instrument with longer maturity than short-term loans, DiasporaBonds are best to finance long-term projects
    • infrastructure (for prosaic reasons, roads, sewers, water supplies, energy); education & healthcare (building new facilities, revamping existing); capital financing for new residential development; capital financing for new industrial sectors / techno parks development
  • DiasporaBond is non-inflationary, this means it is not intended as consumer or business credit facility
    • Unless, of course, a host of serious macroeconomic conditionalities and strict checks/balances system are enforced.
  • On the latter point, conditions are appropriate as DiasporaBond financing would normally go towards areas in the national economy otherwise not appealing to a committed global investor.
  • Regulation: with all the usual players in place (Min Finance, Central Bank, investment bankers, etc), there perhaps should also be a State – Diaspora Supervisory   Board in some form – as an oversight, bringing Diaspora expertise, and advisory group – with a clearly defined (and limited) mandate.
  • WHO-1: DiasporaBond cannot not solely target labor migrants (or recent expatriates). Trends in remittances transfers are not indicative of the diaspora’s interest in purchasing a long-term sovereign bond at a discount rate with unspecified risks of repayment
  • WHO-2: Part of the DiasporaBond program’s success would be conditioned on availability of range of options for members of the “old” and the “new” diaspora in a range of denominations
  • WHERE: a DiasporaBond program requires clear identification of the applicable jurisdiction for any disputes and any other obligations to lender/borrower
  • DiasporaBond Exchange Program—may help individual investor to donate their bonds as charitable contributions to school, universities, hospitals, etc as a way of boosting endowments of the latter. Additionally, an exchange mechanism may be created to facilitate further financial market deepening.
  • Reaching beyond altruistic diaspora with the DiasporaBond requires solid presence in the international financial markets, macroeconomic and institutional predictability.
  • DiasporaBond may[!] lead to initiation of more stable large scale capital funding for a small open economy from a more diverse investor pool.
  • DiasporaBond is not a guaranteed success. Promoting and competing for diaspora investment interest requires massive dedicated effort and soft-capital concentration.

READ:

Gevorkyan, A.V. 2008. Fiscal Policy and Alternative Sources of Public Capital in Transition Economies: the Diaspora Bond. Journal of International Business and Economy, 9(2): 33-61. https://www.researchgate.net/publication/324133338_Fiscal_Policy_and_Alternative_Sources_of_Public_Capital_in_Transition_Economies_Diaspora_Bond

Most definitive reference on the topic: http://www.israelbonds.com/Home.aspx

A migration development bank that works

There are two critical factors to the contemporary phase of global labor migration: diaspora and remittances (small foreign currency transfers from host to home economies). Both can be the forces contributing to and fostering macroeconomic development in (usually) structurally weaker home (sender) economies.The way to do it?

In a recent essay entitled “Toward a Migration Development Bank for Transition Economies” Otaviano Canuto and I try to rationalize some optimal solutions. Continue reading

The legends of the Caucasus…

In a recent paper, in the International Business Review, entitled “The Legends of the Caucasus: Economic Transformation of Armenia and Georgia”  I attempt to evaluate the past two decades of macroeconomic, business, and institutional transformation in the two small open economies.

All standard clarifications on the imperfections of the post-socialist transition aside, I argue, that the two are open to international business that follows the local context.

Continue reading

Emerging markets uncertainty

Last week Gavyn Davies reported in FT.com a summary of his debate on emerging markets with three prominent economists: Maurice Obstfeld (USC-Berkeley), Alan M. Taylor (UC-Davis), and Dominic Wilson (Co-Head of Global Economics, Goldman Sachs) – the “panel”. In summary (read full transcript here), the panel finds much vulnerability in the emerging markets (EMs). What’s more, any significant upset in the EMs might  backfire into developed markets (DMs) instabilities via external sector and commodity prices imbalances. Continue reading

Sorting through “emerging” financial markets

Wrapping up this year’s Eastern Economic Association Conference, where I organized and chaired a session entitled ‘The perils of financial deepening and post-crisis development in emerging markets‘.

The panel addressed current opportunities and risks to [what we’ve become accustomed to refer to as] emerging economies given their increased involvement in the international capital markets & commodity trade, sovereign borrowing, and exchange rate stabilization strategies in the light of economic uncertainty exacerbated by sporadic capital flows, migration, trade imbalance, and a host of other factors, climate change included. Continue reading

Daron Acemoglu at Armenian Economic Association 2013 meeting;

Hi, follow this link for keynote address by Prof. Daron Acemoglu of MIT at the Armenian Economic Association’s meeting in October 2013.  AEA 2013, keynote: Daron Acemoglu, MIT

I followed up with a question on South Korea’s experience and transformation in Eastern Europe. Why such a question? The theme comes up routinely in almost any informed discussion centered around economic development. Check it here.

Overall, there were some really interesting points in the keynote presentation and in the Q&A and during the entire conference.