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Sovereign wealth - no fund: The decisive role of domestic veto players


  • Reinsberg, Bernhard


Sovereign Wealth Funds (SWFs), government-owned investment funds, are of growing importance in international finance. They are a vehicle to manage foreign exchange reserves and wealth which have been accumulating in the emerging world, particularly in the BRICs. However, while China and Russia set up SWFs over the last decade, India and Brazil still lack such funds. In analysing thoroughly the Indian case, this paper seeks to contribute to recent literature on the determinants of SWFs with two main findings: First, it confirms conventional economic theory which shows the requirement of excessive foreign reserves for the set-up of SWFs. Second, it suggests that political systems matter, as demonstrated by the lively debate in India on whether that country should have such a fund. In this way, influential societal actors, in particular the central bank and regulating agencies as well as business associations, have dominated the public discourse and successfully lobbied the government to waive initial plans in support of an alternative wealth management scheme.

Suggested Citation

  • Reinsberg, Bernhard, 2009. "Sovereign wealth - no fund: The decisive role of domestic veto players," PIPE - Papers on International Political Economy 1/2009, Free University Berlin, Center for International Political Economy.
  • Handle: RePEc:zbw:fubipe:12009

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    References listed on IDEAS

    1. Ranawat, Mahipat & Tiwari, Rajnish, 2009. "Influence of government policies on industry development: The case of India's automotive industry," Working Papers 57, Hamburg University of Technology (TUHH), Institute for Technology and Innovation Management.
    2. Makombe, Tsitsi & Collins, Julia & Badiane, Ousmane & Breisinger, Clemens & Abdelaziz, Fatma & Khouri, Nadim & Akramov, Kamiljon T. & Park, Allen & Ilyasov, Jarilkasin & Kumar, Anjani & Ahmed, Akhter , 2017. "Regional developments," IFPRI book chapters,in: 2017 Global Food Policy Report, chapter 7, pages 58-83 International Food Policy Research Institute (IFPRI).
    3. Badiane, Ousmane & Makombe, Tsitsi & Collins, Julia & Khouri, Nadim & Breisinger, Clemens & Akramov, Kamiljon T. & Park, Allen & Joshi, Pramod Kumar & Ahmed, Akhter U. & Davies, Stephen & Kumar, Anjan, 2016. "Regional developments," IFPRI book chapters,in: 2016 Global Food Policy Report, chapter 9, pages 80-107 International Food Policy Research Institute (IFPRI).
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    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration


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