Sovereign Wealth Fund Decision Scorecard (DSC) - Macroeconomic Evidences from 21st Century Funds
International Journal of Applied Social Science Research, ISSN: 2319-8516, Vol 2, Number 1, January 2013, pp.110-115
6 Pages Posted: 17 Jan 2013 Last revised: 11 Nov 2013
Date Written: January 10, 2013
Sovereign Wealth Funds (SWFs) with combined asset under management of around $5 Trillion have emerged as major power in the financial world and have emerged as lender of last resort during the great recession of 2008. Most of the literature on these funds is focused on financial portfolio, transparency and governance of these funds. There is dearth of literature which has empirically analyzed the decision variables impacting the establishment of these funds. Author has identified and collaborated list of 63 variables which were then rationalized to list of 30 variables that may have affected establishment of Sovereign Wealth Funds during 21st Century. These variables were applied to selected 13 funds which were established from 2000-2012 to analyze the ‘static state’ of these variables with respect to macroeconomic and socio-political environment in the country. Author analyzed that in line with the popular literature, conformance to reserve adequacy matrices and consistence of foreign exchange inflow has been reconfirmed as decisive variables for emerging economies which have established their Sovereign Wealth Fund. One of the interesting variables emerged from the research which is essential support for the creation of funds is that of Political stability. Author also argue that contrary to popular literature, current account and fiscal account deficit are not the determining decision variables for creation of SWF as 5 countries were running twin deficit at the time of creation of such fund. Peer pressure has also been reconfirmed as major decision factor with 85% of occurrence. Author also suggests that DSC can be a vital decision support tools for the future funds and identified the future area of research in this domain.
Keywords: International Finance, Sovereign Wealth Funds, Macroeconomics, Forex reserves
JEL Classification: A10
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