Paula-Leone Samuda

Job Market Paper(linked)

Reserve Accumulation, Domestic Credit Expansion, and Financial Integration: Subordinate Financialization in Small Island Developing States

Abstract: Since the early 2000s, small island developing states (SIDS) have become increasingly integrated into hierarchical global financial structures, accumulating substantial foreign exchange reserves and undergoing a transformation of their domestic financial structures. Using quarterly panel data for 27 SIDS over 2001Q4--2024Q1, this paper applies panel local projections to examine how central bank reserve accumulation relates to the balance sheets of the central bank and of other depository corporations (ODCs). The findings show that central bank reserve accumulation coincides with a broad-based expansion of ODC balance sheets, with higher cross-border assets and liabilities, mostly in foreign currency, and higher domestic credit. On the central bank balance sheet, most of the increase appears in the monetary base, mainly in the form of higher ODC reserve deposits at the central bank. This expansion, however, takes different forms across the sample. In pegged and tourism-dependent economies, foreign currency positions remain elevated while the credit response is short-lived, whereas in floating and non-tourism-dependent economies, domestic credit expands more and for longer. The largely contemporaneous co-movement between reserves and bank balance sheets is more consistent with a subordinate financialization view, in which reserve accumulation shifts rather than removes external vulnerability, than with the conventional precautionary view. The paper thereby contributes to the financial subordination literature by documenting how reserve accumulation is associated with a transformation of the domestic financial systems in these vulnerable economies.

Selected Works in Progress

Sovereign Debt and Financial Instability: How is Sovereign Debt Accumulation linked to Global Finance?

Abstract: External sovereign debt accumulation has become a burden for economies on the periphery of global finance. These nations are constantly drawn into global financial markets due to the ease of access to external capital; however, they face severe financial crises when their governments are unable to meet debt obligations to creditors in developed countries. This paper examines whether sovereign debt burdens in emerging and developing economies co-move with liquidity conditions originating in advanced economies. Drawing on a Minskyan framework, it estimates panel local projections relating external sovereign debt to country borrowing conditions and global financial conditions across 81 developing countries from 2000 to 2024. Debt burdens co-move positively with the interest rate spread on new sovereign borrowing, an association that is transitory before the global financial crisis and persistent afterwards. Debt burdens are also associated with movements in US inflation expectations, the real dollar index and emerging market credit conditions, though not with financial market or crude oil price volatility. The strength of these associations varies with initial indebtedness: countries whose debt burdens exceeded the sample median before 2008 show substantially larger responses to both borrowing costs and global conditions. Taken together, the findings point to a precarious cycle facing peripheral economies raising funds on external debt markets within a hierarchical global financial system.

Global Dollar Liquidity and Developing Country Debt Dynamics

with Ramaa Vasudevan

Abstract: This paper seeks to elaborate a plausible structuralist analytical model that provides insights into patterns of debt-cycles and financial fragility in emerging markets and developing economies driven by the investment behavior of non-bank financial institutions that have become dominant in the recent phase of global liquidity. It builds on Lance Taylor's discussion of the evolution of mechanisms of liquidity and financial structures through successive stages of financial development on one hand and the alternative structuralist models he put forward to explaining developing country debt cycles and capital account crises on the other. The cycles of liquidity and leverage that drive global funding and the risk-taking behavior that governs portfolio choices of global investors channel enmeshes capital flows to EMDEs in global financial cycles linked to monetary conditions in the US and the dollar index. Specifically, capital flight is triggered by the evaporation of global dollar liquidity rather than arising from adverse domestic macro-economic conditions. These developments in the international financial system have rendered the potential instability implicit in Taylor's original formulation a certainty.

The History of Heterodox Thought at the University of the West Indies, From the 1950s to the early 2000s

with Chavon Rogers and Francisco Perez

Abstract: The University of the West Indies, established in 1948 through a regional partnership between the British government and its colonial Caribbean territories, was founded with the aim of advancing higher education and promoting regional integration. Following independence and the social upheavals of the 1950s, the university and its Economics Departments developed a critical tradition of economic thought and advocacy for regional development. Across the university's three campuses—Mona in Jamaica, St. Augustine in Trinidad and Tobago, and Cave Hill in Barbados—economics departments cultivated a heterodox approach that challenged orthodox development paradigms and provided incisive critiques of imperialism and dependency. Technical analyses of labor markets and productivity, such as those by George Cumper, were complemented by the dependency theories of Lloyd Best, Kari Polanyi Levitt, George Beckford, and Norman Girvan through the Plantation Economy School, as well as Marxist critiques advanced by Richard Bernal and Michael Witter. The university thus became a center for Caribbean economists to theorize about the region's economic challenges. These scholars systematically examined trade relations that confined the islands to primary export production, the global financial system that extracted capital from regional economies, and the influence of multinational corporations that controlled production and perpetuated laboring conditions rooted in the racial hierarchies of slavery and colonialism.

By the 1980s, this intellectual tradition had entered a period of decline. The emergence of the neoliberal consensus in the Caribbean during the 1970s and 1980s, driven by debt crises, deteriorating terms of trade, and International Monetary Fund (IMF) conditionality, led to the retreat of heterodox economic thought from the university. In its place, more orthodox approaches gained prominence, reflecting the structural constraints imposed by multinational institutions and the collapse of state-led industrial policy. This article examines the rise and decline of heterodox economics at the University of the West Indies (UWI), contending that the evolution of economic thought at the university parallels the broader political-economic transformation of the Caribbean. The intellectual project that once aimed to reshape Caribbean development through indigenous critical perspectives ultimately yielded to a reluctant acceptance of integration into the global capitalist system on terms determined externally.