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ITALY: M5S turmoil unlikely to affect government stability

ITALY: M5S turmoil unlikely to affect government stability | Speevr

The co-ruling Five Star Movement (M5S) plunged, once again, into deep turmoil and is now at risk of a split after a public row between its founder, former comedian Beppe Grillo, and former Prime Minister Giuseppe Conte, who had agreed to take charge of the struggling party. Conte…   Become a member to read the […]

EUROPE: CEE PULSE

EUROPE: CEE PULSE | Speevr

Romania’s government comfortably survived a motion of no confidence, but slow vaccination and rivalries within the ruling National Liberal Party are pertinent risks going forward. Russia is continuing its efforts to mitigate surging prices of food and various commodities ahead of…   Become a member to read the rest of this article

The future of bank overdraft fees

The future of bank overdraft fees | Speevr

Bank overdraft fees have been on the rise for many years as income volatility rises and more Americans live paycheck-to-paycheck. Federal bank regulators have done little to help American families, failing to speed up America’s payment system to address one of the many root causes of overdrafts (slow deposit times) while giving a thumbs up to banks who choose to increase profits at the expense of those living on the financial edge.  A few banks and financial technology firms are choosing a different path, creating new products designed to help consumers avoid overdraft, attacking the problem of why it is so expensive to be poor.
Join Brookings as we engage in an in-depth conversation with these banks, financial technology firms, and consumer advocates to explore alternatives to overdraft. We will analyze whether new technology and products can meet people’s needs for financial flexibility in a more fair and efficient manner. To facilitate this discussion we will premier a new format to engage industry and consumer voices in this provocative conversation.
Viewers can submit questions for speakers by emailing events@brookings.edu or via Twitter using #Overdraft.

Remittances: One more thing that economists failed at predicting during COVID-19

Remittances: One more thing that economists failed at predicting during COVID-19 | Speevr

Remittances—the flow of capital from immigrants to their families and friends back home—are a crucial source of income for many countries, representing over 20 percent of the GDP in nations such as Tonga, Tajikistan, Haiti, Honduras, and El Salvador, among others. As of 2019, remittances reached an unprecedented level of about $550 billion, becoming the largest financial flow in the world, surpassing official development assistance (ODA).

Hence, when COVID-19 became a global pandemic in the second quarter of 2020, policymakers worried about the resilience of remittance flows. The World Bank projected that remittances would drop by nearly 20 percent, falling by over $100 billion in 2020 compared to 2019. The intuition was clear. The largest remittance-sending country in the world is the United States (sending over $70 billion as of 2019), whose economy was predicted to shrink significantly due to reduced mobility as people, businesses, and policies responded to COVID-19. Many immigrants working in service industries were especially hard hit so it was logical to project a sharp decline in remittance flows.
Turns out, however, the unexpected happened. We now know that the global flow of remittances during 2020 reached about $540 billion, about 2 percent short of the 2019 record high. Remittance inflows into Latin America and the Caribbean actually grew by about 6.5 percent in 2020. While they dropped in other regions (namely, East Asia and the Pacific, Europe and Central Asia, and sub-Saharan Africa), the overall dynamics defied expectations. It turns out that remittances were (and perhaps will continue to be) an extremely resilient flow.
The global flow of remittances during 2020 reached about $540 billion, about 2 percent short of the 2019 record high.
How can we make sense, ex post, of this yet another failed prediction by economists? Well, we certainly will need some more data to understand what exactly happened. But here I offer a few possible explanations, hoping more in-depth research will disentangle between them in the not-so-distant future.
First, there is probably a lot of heterogeneity among the type of immigrants sending remittances, particularly in cases where outflows grew. Immigrants are a very diverse group of people. And while remittance outflows might have decreased among immigrants more vulnerable to the economic downturn, they probably increased among immigrants that have a steadier source of income.
But, why would remittances increase (as opposed to remaining steady) at times when it is difficult for everyone? This is where human resilience and empathy enter the equation. In the U.S., for instance, the economic recovery is an unexpectedly quick one, whereas it was clear from the beginning that in the developing world COVID-19 would hit emerging markets especially hard. Thus, it is likely that immigrants living in the U.S. decided to make an extra effort to send some more funds to their friends and families to make sure they will have extra income in the uncertain times ahead. In other words, by foreseeing that the economic downturn would be relatively worse in their home countries, immigrants stepped up to make sure their families would be financially more comfortable. In fact, economic research on remittances finds evidence that these flows—as opposed to foreign investment, for instance—are countercyclical for the country of origin of the immigrant. In other words, when times are hard in the home country, immigrants would send more funds to make sure their families and friends back home have enough funds to thrive during the downturn.

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Second, evidence suggests that many immigrants were able to dip into their savings to continue to support their families abroad—even for immigrants that faced difficulties in terms of their employment. Several pieces of empirical work (reviewed here) show that many immigrants accumulate savings which they typically use to invest if and when they return.
Third, while it is clear that for many immigrants in the U.S. things became really difficult economically (health-wise, too, as minorities had a higher morbidity rate than the average American), immigrants are also thought to be very resilient people given their risk-taking behavior. Early on, immigrants in the U.S., alongside other minorities, were a driving force of the lockdown economy, as many of them were working in fundamental occupations. Many immigrants, knowing that returning to their home countries was not an option during the pandemic—and in many cases without any guarantees that they could count on government assistance—would respond to hardships by finding creative ways to remain employed, like switching industries or occupations or working extra hours. All in order to support their families, including those left behind. It is this resilience of immigrants that makes them such an asset to host countries in general.
Thus, even if it is too early to understand the insights that a more rigorous analysis using data would give us to explain how during a global recession remittances stayed pretty much untouched, just the fact that it happened suggests that humanity and resilience are at the core of this phenomenon.

EUROPE: Managing the pandemic – what we are watching

EUROPE: Managing the pandemic – what we are watching | Speevr

This updated weekly piece provides snapshots of how selected European governments are dealing with the ongoing Covid-19 pandemic. Please do not hesitate to contact us if you want to discuss any of the countries mentioned in more detail. Graph of the week France – The Delta v…   Become a member to read the rest […]

CHILE: Path to a new constitution unlikely to be straightforward

CHILE: Path to a new constitution unlikely to be straightforward | Speevr

The constituent assembly specially elected to draft a new constitution officially opens on 4 July. Chile has an opportunity to build a more inclusive growth model and settle the political disaffection that exploded into major unrest in late-2019. However, political frag…   Become a member to read the rest of this article

CHINA: Party’s 100th anniversary aims to boost legitimacy, contrast with US

CHINA: Party's 100th anniversary aims to boost legitimacy, contrast with US | Speevr

The Chinese Communist Party marked its 100th anniversary on 1 July; propaganda authorities are using the event to boost the party’s legitimacy. The anniversary celebrations feature familiar messages about the party’s achievements but also highlight howthe party is actively…   Become a member to read the rest of this article

INDONESIA: Widodo announces wider restrictions over half the country

INDONESIA: Widodo announces wider restrictions over half the country | Speevr

Measures will limit most commercial and social activities on Java and Bali until 20 July, with the goal of cutting in half the current new case rate of roughly 20,000 per day. Government is targeting raising the daily vaccination rate from roughly 0.25% of the population t…   Become a member to read the rest […]

Distrust or speculation? the socioeconomic drivers of U.S. cryptocurrency investments

Distrust or speculation? the socioeconomic drivers of U.S. cryptocurrency investments | Speevr

Employing representative data from the U.S. Survey of Consumer Payment Choice, we disprove the hypothesis that cryptocurrency investors are motivatedby distrust in fiat currencies or regulated finance. Compared with the general population, investors show no differences in their level of security concerns with either cash or commercial banking services. We find that cryptocurrency investors tend to be educated, young and digital natives. In recent years, a gap in ownership of cryptocurrencies across genders has emerged. We examine how investor characteristics vary across cryptocurrencies and show that owners of cryptocurrencies increasingly tend to hold their investment for longer periods.