Appreciation of the Role of Sovereign Wealth Funds in the Global Economy

Csoma, Róbert (2015) Appreciation of the Role of Sovereign Wealth Funds in the Global Economy. Public Finance Quarterly = Pénzügyi Szemle, 60 (2). pp. 270-287.

PDF - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader


This article is intended to explore the reasons behind the accumulation of massive foreign currency assets in oil export-ing and large manufacturing economies in the 2000s, and to explain how the affected countries adjusted their investment policies after the 2008 crisis in respect of their reserves. Based on the statistics and analyses available, the article demonstrates how it was inevitable in these countries to dedicate a substantial portion of the claims – in excess of the optimum central bank reserves – to set up large public funds (“sovereign wealth funds”), and to invest a part of the assets in those funds abroad. This proved to be a wise solution particularly in China, where fiscal reasons render the economy prone to overheating in any case, and the unrestricted exchange of export receivables to the domestic currency would make the money supply balloon, leading to high inflation. Although low-risk but also low-return money market investments had dominated sovereign wealth funds for a long period of time, the countries concerned have changed their investment policies since the crisis, gradually shifting their focus to capital market options promising higher returns. Owing to the tightening of regulations in the wake of the crisis, banks’ previous role in project finance was called into question, especially in the case of infrastructure project financing, which is associated with a long-term return on investment. This provided an additional investment opportunity for the funds. At the same time, through the investment activity of funds, a peculiar nationalisation process is at work in the global economy, allowing funds owned by foreign governments to interfere with the strategic decisions of private corporations.

Item Type:Article
Uncontrolled Keywords:sovereign wealth fund, nationalisation, China–USA economic relations, long-term financing
JEL classification:F02 - International Economic Order
F32 - Current Account Adjustment; Short-term Capital Movements
F34 - International Lending and Debt Problems
F62 - Economic Impacts of Globalization: Macroeconomic Impacts
F64 - Economic Impacts of Globalization: Environment
ID Code:8847
Deposited By: Alexa Horváth
Deposited On:18 Sep 2023 08:47
Last Modified:18 Sep 2023 08:47

Repository Staff Only: item control page


Downloads per month over past year

View more statistics