the early history of modern ecological economics abstract this paper provides a historical perspective for the discussion on ecological economics as a special field of research by studying the historical background of ecological economics the present discussions and tensions inside the field might become easier to understand and to relate to the study is inspired by other studies of the emergence of new research areas done by sociologists and historians of science and includes both cognitive and social aspects macro trends and the role of individuals the basis for the paper is a combination of literature studies and interviews with key researchers from the field the story opens with the emergence of the new environmental agenda in the 1960s which was influenced by the scientific development in biology and ecology then it is outlined how the environmental challenge was met by economics in the 1960s around 1970 the basic ideas of ecological economics were given modern formulations but it took a long gestation period from the beginning of the 1970s to the end of the 1980s before ecological economics took shape during this gestation period the personal relationships between the actors were formed and the meetings that were decisive for the formal establishment of ecological economics took place

a perspective on the symptoms and causes of the financial crisis abstract prior to the 2007 2008 financial crisis banking sector profits were very high but the profitability of financial intermediation was poor using a novel model of banking this article argues that the high profits were achieved through balance sheet expansion and growing default liquidity and term risk mismatches between assets and liabilities as a result large banks financial leverage rose as they became less liquid setting the conditions for a systemic banking crisis this article argues that the increase in financial leverage was possible due to misguided changes in the regulatory framework specifically the basel i capital accord and reductions in reserve requirements finally this article overviews and assesses the policy response in the aftermath of the crisis

the global financial crisis explaining cross country differences in the output impact abstract what explains differences in the crisis impact across developing countries and emerging markets using cross country regressions to assess the factors driving the growth performance in 2009 compared to pre crisis forecasts for that year we find that a small set of variables explain a large share of the variation in the growth impact countries with more leveraged domestic financial systems stronger credit growth and more short term debt tended to suffer a larger effect on economic activity although the relative importance of these factors differs across country groups for emerging markets this financial channel trumps the trade channel for a broader set of developing countries however the trade channel seems to have mattered with more open countries affected more strongly and those exporting food commodities being less hard hit exchange rate flexibility helped in buffering the impact of the shock particularly for emerging markets there is also some evidence that countries with a stronger fiscal position prior to the crisis were impacted less severely we find little evidence for the importance of other policy variables

nonmonetary effects of the financial crisis in propagation of the great depression this paper examines the effects of the financial crisis of the 1930s onthe path of aggregate output during that period our approach is complementary to that of friedman and schwartz who emphasized the monetary impact of the bank failures we focus on non monetary primarily credit related aspects of the financial sector output link and consider the problems of debtors as well as those of the banking system we argue that the financial disruptions of 1930 33 reduced the efficiency of the credit allocation process and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand evidence suggests that effects of this type can help explain the unusual length and depth of the great depression this abstract was borrowed from another version of this item

economic specialization versus ecological diversification the trade policy implications of taking the ecosystem approach seriously abstract the author contrasts the economic principle of specialization found in trade theory with the ecological principle of diversification that underlies the ecosystem approach to natural resource use he argues that current ecosystem decline is a consequence of the over extension of the principle of specialization from the factory setting to nature when the specialization principle is applied wholeheartedly to natural systems to speed up their delivery of desired commercial products it leads to ecosystem simplification loss of integrity and stress this occurs for example in modern approaches to forest management when clearcutting and replanting with genetically modified seeds occurs with heavy inputs of fertilizers herbicides and pesticides what is required is a re balancing of the application of the principle of specialization with the principle of diversification as occurs when forests are managed according to an ecosystem based approach this re balancing occurs at the level of production however not at the level of trade consequently the focus of environmental reform must be production policy not trade policy

a new index of financial conditions we use factor augmented vector autoregressive models with time varying coefficients and stochastic volatility to construct a financial conditions index that can accurately track expectations about growth in key us macroeconomic variables time variation in the models parameters allows for the weights attached to each financial variable in the index to evolve over time furthermore we develop methods for dynamic model averaging or selection which allow the financial variables entering into the financial conditions index to change over time we discuss why such extensions of the existing literature are important and show them to be so in an empirical application involving a wide range of financial variables

credit constraints and the international propagation of us financial shocks abstract this paper investigates whether credit constraints in the us economy amplify the international propagation of us financial shocks we model the dynamics of the us economy jointly with global macroeconomic and financial variables using a threshold vector autoregression this model captures regime specific dynamics conditional on the severity of credit constraints in the us economy we identify three main episodes of tight credit in us financial history over the past thirty years these occur in the late 1980s in the early 2000s and during the 2007 09 financial crisis we find that us financial shocks are associated with a significant contraction in global economic activity in times of tight credit by contrast there is little impact of us financial shocks on the global economy in normal times this asymmetry highlights an international dimension of the us financial accelerator mechanism

irrational workers the moral economy of labor protest in egypt after comparing the predictions of marxist moral economy and rational choice theories concerning collective actions by workers in egypt in the period since the 1952 free officers coup this article concludes that a moral economy perspective is best able to explain the nature and frequency of these protests the supporting evidence is the correlation between labor protest and violations of workers feelings of entitlement as manifest in declining real wages or disruptions to established patterns of wage differentials the targeting of state institutions combined with the fact that workers have eschewed actual production stoppages in favor of symbolic protests indicates a view of reciprocal rights and obligations between themselves and the state the latter reinforces the moral economy by combining significant concessions with its repressive response to labor protests marxism proves unable to explain the largely defensive and reactive nature of labor protest while rational choice theory is reduced to efforts to quantify workers reactions to this repression

resilience in the dynamics of economy environment systems the ecological concept of resilience has begun to inform analysis of change in economy environment systems the linkages between resilience and the stability of dynamical systems are discussed along with its role in understanding of the evolution of such systems particular linkages discussed include those between resilience biodiversity and the sustainability of alternative states recent developments in modelling the resilience of joint economy environment systems suggest the advantages of analysing change in the system as a markov process the transition probabilities between states offering a natural measure of the resilience of the system in such states it is argued that this emergent property of the collaboration between ecology and economics has far reaching implications for the way we think about model and manage the environmental sustainability of economic development

nonparametric nonlinear cotrending analysis with an application to interest and inflation in the united states given the assumption that the components of a vector time series are stationary around nonlinear deterministic time trends nonlinear cotrending is the phenomenon that one or more linear combinations of the time series are stationary around a linear trend or a constant hence the series have common nonlinear deterministic time trends in this article i develop nonparametric tests for nonlinear cotrending and i derive nonparametric estimators of the cotrending vectors i apply this approach to the federal funds rate and the consumer price index inflation rate in the united states using monthly data to analyze the price puzzle

what happens during recessions crunches and busts we provide a comprehensive empirical characterization of the linkages between key macroeconomic and financial variables around business and financial cycles for 21 oecd countries over the period 1960 2007 in particular we analyse the implications of 122 recessions 113 28 credit contraction crunch episodes 114 28 episodes of house price declines busts 245 61 episodes of equity price declines busts and their various overlaps in these countries over the sample period our results indicate that the interactions between macroeconomic and financial variables can play a major role in determining the severity and duration of a recession specifically we find evidence that recessions associated with credit crunches and house price busts tend to be deeper and longer than other recessions stijn claessens m ayhan kose and marco e terrones

bank integration and co movements across housing markets this paper investigates whether bank integration measured by cross border bank flows can capture the co movements across housing markets in developed countries by using a spatial dynamic panel model the transmission can occur through a global banking channel in which global banks intermediate wholesale funding to local banks changes in financial conditions are passed across borders through the banks balance sheet exposure to credit currency maturity and funding risks resulting in house price spillovers while controlling for country level and global factors we find significant co movement across housing markets of countries with proportionally high bank integration bank integration can better capture house price co movements than other measures of economic integration once we account for bank exposure other spatial linkages traditionally used to account for return co movements across region such as trade foreign direct investment portfolio investment geographic proximity etc become insignificant moreover we find that the co movement across housing markets decreases for countries with less developed mortgage markets characterized by fixed mortgage rate contracts low limits of loan to value ratios and no mortgage equity withdrawal

from great depression to great credit crisis similarities differences and lessons the great depression of the 1930s and the great credit crisis of the 2000s had similar causes but elicited strikingly different policy responses while it remains too early to assess the effectiveness of current policy it is possible to analyse monetary and fiscal responses in the 1930s as a natural experiment or counterfactual capable of shedding light on the impact of current policies we employ vector autoregressions instrumental variables and qualitative evidence for 27 countries in the period 1925 39 the results suggest that monetary and fiscal stimulus was effective that where it did not make a difference it was not tried they shed light on the debate over fiscal multipliers in episodes of financial crisis they are consistent with multipliers at the higher end of those estimated in the recent literature and with the argument that the impact of fiscal stimulus will be greater when banking systems are dysfunctional and monetary policy is constrained by the zero bound miguel almunia agustin benetrix barry eichengreen kevin h o rourke and gisela rua

the great recession the treadmill of production and ecological disorganization did the recession decrease toxic releases across us states 2005 2014 abstract the treadmill of production ecological marxist steady state economics and the natural science literatures suggest that economic growth and pollution are linked we use the economic downturn resulting from the great recession in 2008 2009 as a natural experiment to test this hypothesis specifically we examine the effect of the great recession on pollution measured by the environmental protection agency s toxics release inventory tri using maps and fixed effects regression models for us states for the period 2005 2014 multivariate time series analysis demonstrates that even when adjusting for controls there is a unique and negative effect of the recession on tri levels we situate our findings in the relevant literature suggest possibilities for what the recession effect may be capturing and discuss some implications of increased pollution levels

the japanese deflation has it had real effects could it have been avoided has deflation contributed to the long lasting stagnation of the japanese economy could the bank of japan have stopped deflation by implementing a more expansionary monetary policy tentative answers are probably not to the first question and probably yes to the second question it is found that the total cost of deflation over the period 1995 2003 has been close to a 1 1 rate of lost gdp yet on the basis of statistical significance and robustness to specification choices this evidence is not compelling on the other hand the estimated positive linkage between nominal base money growth and inflation is significant and robust even given current economic conditions however in order to be inflationary monetary policy should have been more expansionary than what actually observed even since the launch of the quantitative easing in 2001

assessing global economic activity linkages the role played by united states germany and china abstract economic performance increasingly relies on global economic environment due to the growing importance of trade and financial links among countries this work aims to analyze the possible effects of a potential economic growth downturn or one large negative shock in china germany and united states on the growth of other economies we use a univariate global autoregressive approach to assess interdependence across 38 countries we simulate two types of phenomena the first one is a one time large shock of 2 5 standard deviations the second experiment simulates the effect of a hypothetical downturn of the aforementioned economies our results suggest that the united states play the role of a global economy affecting countries all over the globe whereas germany and china play an important regional role

international aspects of the great depression and the crisis of 2007 similarities differences and lessons we focus on two international aspects of the great depression financial crises and international trade and try to discern lessons for the current economic crisis both downturns featured global banking crises which were generated by boom slump macroeconomic cycles during both crises world trade collapsed faster than world incomes and the trade decline was highly synchronized across countries during the depression income losses and rises in trade barriers explain trade s collapse owing to vertical specialization and more intense trade in durables today s trade collapse is due to uncertainty and small shocks to trade costs hitting international supply chains so far the global economy has avoided the global trade wars and banking collapses of the depression perhaps owing to improved policy even so the global economy remains susceptible to large shocks owing to financial innovation and technological

scattered landholdings in common property systems abstract concepts of common property have received increasing attention in recent years this has been associated with a re evaluation of historical common property institutions such as the medieval commons one of the major problems raised in the process has been the need to explain the phenomenon of scattering of a farmer s landholdings into a number of separate strips an explanation is sought in the need for a smoothly operating collective decision process scattering is seen as a means by which intra group conflict can be minimized other aspects of the problem such as externalities are also examined

how do us credit supply shocks propagate internationally a gvar approach abstract we study how us credit supply shocks are transmitted to other economies we use the recently developed gvar approach to model financial variables jointly with macroeconomic variables in 33 countries for the period 1983 2009 we experiment with inter country links based on bilateral trade portfolio investment foreign direct investment and banking exposures capturing both bilateral trade and financial exposures in a gvar fits the data better than using trade weights only we use sign restrictions on the short run impulse responses in the us model to identify the credit supply shocks we find that negative credit supply shocks have strong negative effects on us and foreign gdp credit and equity markets in several countries respond clearly to the shocks exchange rate responses are consistent with a flight to quality to the us dollar the credit supply shocks explain about a fifth of one year ahead output forecast error variance in the us and about a tenth in the euro area and the uk but considerably less elsewhere

did financial factors matter during the great recession abstract yes they mattered to reply to this question we assess the predictive content of macroeconomic and financial latent factors on the key variables industrial productivity short term interest rate and inflation during the great recession period 2007 2009 in the united states in this respect we propose a forecasting analysis using a factor augmented var model when we estimate the model with only financial factors we improve the predictions in the short and medium horizons meanwhile when we estimate the model with only macroeconomic factors we improve the forecasting performance in the longer horizon

a note on the idea of the moral economy in their research note robert bates and amy curry 1992 have drawn our attention to the importance for political science of the challenges posed by the moral economic approach using their essay as a springboard and recasting their understanding of the idea of the moral economy i show that the full significance of this controversy would be better illuminated by moving the debate on to a different terrain one that captures the fundamental sources of the antagonism between the moral economic and competing approaches i begin by setting out the central difficulty in bates and curry s reading of the moral economy argument and relate that to how the controversy has been framed in the recent political science literature i then offer a sketch of the core claims of the moral economic approach drawing out the radicalness of their challenge and offer an estimate of their weaknesses and value i conclude with some observations about political philosophy and the idea of the moral economy

housing cycles and macroeconomic fluctuations a global perspective abstract this paper investigates the international spillovers of housing demand shocks on real economic activity the global economy is modeled using a global var with a novel house price data set for both advanced and emerging economies the impulse responses to an identified u s housing demand shock confirm the existence of strong international spillovers to advanced economies in contrast the response of some major emerging economies is not significantly different from zero moreover the analysis of synchronized housing demand shocks speaks in favor of the recent evidence of increased resilience of emerging economies to shocks originating in advanced economies and it also suggests that a close monitoring of housing cycles in advanced economies as well as in emerging economies should be of interest for policy makers

community versus market a note on corporate villages we return to the literature on collective villages and reexamine its central arguments in doing so we focus on an institution for allocating land that we call the rule as claimed by its advocates the rule secures land allocations that result in outcomes differing from those that would be achieved by markets the outcomes are not constrained to be efficient but the economic costs paid fail to secure the attainment of guarantees of subsistence greater equality or a greater sense of community resulting from the elimination of envy however in the face of high levels of risk the form of collective property rights embodied in the rule may create what we call communities of mis fortune in which no one can envy others gains or losses resulting from the random shocks of nature

rethinking moral economy i establish three closely related claims the first two are interpretive the third theoretical 1 the prevailing conception of moral economy in political science presupposed by opponents as well as advocates rests too heavily on the distinction between nonmarket and market based societies 2 the prevailing conception of moral economy reduces to the unduly narrow claim that economic incorporation of a nonmarket people is the basis for the moral indignation that leads to resistance and rebellion 3 reconceptualizing moral economy in terms of social goods reveals additional grounds for politically significant moral indignation and permits moral economic political analysis of a larger set of cases and phenomena water politics in the arid american west illustrate the power of a conception of moral economy based on social goods

living to spend another day exploring resilience as a new fourth goal of ecological economics abstract the three main goals of ecological economic theory seek to predict and prevent system breakdowns however chaos theory and human uncertainty ignorance guarantee that shocks breakdowns and catastrophes like covid 19 will increasingly occur due to converging environmental resource crises the challenge then is designing a resilient safe fail economy that can endure adapt to and successfully recover from breakdowns and avoid collapse to date little attention has been paid in ecological economics to the implications of resilience for broader economic decisions affecting the design of global civilization this paper provides a general introduction to resilience and an argument for why it should become a much larger focus of ecological economic research going forward five arguments are advanced for why resilience should not be subsumed under an existing goal including that efforts to build resilience have the potential to both complement and contradict the other three goals especially efficiency the resilience alliance s adaptive cycle highlighting the cost to resilience of increasing scale and complexity meshes readily with ecological economist s own critiques of growth encouraging increased collaboration between these transdisciplines the need to further study these tensions provides justification for adding resilient design as a distinct fourth policy goal to core ecological economic theory

this is what happened to the oil price macroeconomy relationship abstract many of the quarterly oil price increases observed since 1985 are corrections to even bigger oil price decreases the previous quarter when one looks at the net increase in oil prices over the year recent data are consistent with the historical correlation between oil shocks and recessions

a quest for the economics of sustainability and the sustainability of economics abstract this paper briefly reviews key insights from natural resource and environmental economics ecological economics and industrial ecology in an effort to identify the major contributions of these fields to the understanding and promotion of sustainable development each is based on overlapping worldviews methods and tools their synthesis and extension subsumed under the rubric of natural economics is suggested as a new thrust in environmental research offering valuable guides to policy making an early illustration of the application of natural economics in new zealand is presented

eco localism and sustainability abstract economic sustainability is best secured by the creation of local or regional self reliant community economies this is the central argument of eco local economic theory drawing on the experience of local currencies community corporations regional food economies and other locally oriented efforts eco local theory presents a new analysis of the economy of place it focuses on locally symbiotic capital positive externalities of self reliance and negative externalities of long distance trade and its specific concepts and analyses of the economy efficiency and economies of scale and consumption and welfare given its specific values and assumptions it is an economic theory of the social economy that is compatible with but distinct from ecological economics

the limits to fiscal stimulus the paper considers the case for an internationally coordinated further fiscal stimulus during the second half of 2009 although this makes some of the analysis period specific most of the issues and principles considered are timeless for a fiscal stimulus to be both effective there must be idle resources due to a failure of effective demand for it to be desirable there must be no alternative policy instruments including monetary policy for boosting demand there must be no complete financial crowding out and no complete direct crowding out through ricardian equivalence debt neutrality through minsky equivalence or through a high degree of substitutability between private and public exhaustive expenditure in private preferences or production possibilities finally for international coordination to be desirable there must be cross border externalities from national fiscal stimuli the paper considers each of these conditions in turn

the changing international transmission of financial shocks evidence from a classical time varying favar we study the changing international transmission of financial shocks over the period 1971 2012 global financial shocks are measured as unexpected changes of a u s financial conditions index fci developed by hatzius et al 2010 we model the fci jointly with a large international data set through a time varying parameter factor augmented var and find that financial shocks have a considerable impact on growth in the nine countries considered moreover financial shocks during the global financial crisis are found to be large by historical standards they explain approximately 20 of gdp growth variation on average over 2008 9 compared to an average of 5 prior to the crisis

what makes rational peasants revolutionary dilemma paradox and irony in peasant collective action peasant upheavals are studied from the perspective offered by the selective incentives solution to olson s collective action problem this article presents much evidence from three different forms of peasant struggles everyday forms of peasant resistance unorganized rural movements and organized peasant rebellions that demonstrates the widespread existence of selective incentives questions about the causes and consequences of selective incentives are then examined first what are the conditions under which peasant struggles emphasize material selective incentives rather than nonmaterial altruistic appeals the level of selective incentives in any peasant upheaval is a function of demand and supply considerations peasants demand selective incentives the suppliers include one or more dissident peasant organizations the authorities and the allies of both a political struggle ensues as the suppliers compete and attempt to monopolize the market second what are the conditions under which the pursuit of material self interest hurts rather than helps the peasantry s collective cause selective incentives supplemented by ideology can be effective selective incentives alone are counterproductive these questions and answers lead to the conclusion that the selective incentives solution reveals much more about peasant upheavals than simply that peasants will often be concerned with their own material self interest it is therefore important to study the following three aspects of peasant collective action the dilemma peasants face or how peasant resistance is in the interest of all peasants but in the self interest of none the paradox peasants face or that rational peasants do solve their dilemma for example with selective incentives and participate in collective action and the irony peasants face or that self interest is both at the root of their dilemma and at the foundation of a solution to their paradox

the new development economics abstract the theory of rural organization based on rational peasants in environments where information is imperfect and costly provides a simple explanation for a wide variety of phenomena in ldcs it provides insights into both why sharecropping is so widespread and why it takes on the particular forms that it does it provides an explanation of the interlinkage of credit and land markets and of cost sharing the paper argues that this theory provides a better explanation of these phenomena than do the competing theories this theory can be viewed as an important application of a more general paradigm the imperfect information paradigm which has been useful in explaining economic phenomena under a wide variety of settings under competition oligopoly and monopoly in labor markets capital markets in insurance markets and product markets and in developed and less developed countries

alternative mortgage instruments the tilt problem and consumer welfare mortgage instrument in the united states for the last 50 years and for much of this period it has performed well however during periods of high and volatile rates of inflation the sfpm suffers from severe weaknesses 1 foremost among these problems from the standpoint of the borrower is the tilt in the stream of real mortgage payments toward the initial years of the mortgage for consumers unconstrained by capital market imperfections this tilt is unimportant however a consumer is typically unable to borrow against expected higher future income or against the nominal capital gains that accrue to the owner of a house over the life of the mortgage in addition common practices of mortgage lenders often limit mortgage payments to some fraction of income at the time of purchase together these liquidity constraints create a mismatch between the time se quence of mortgage payments and income a mismatch that reduces the number of borrowers who qualify for financing and that limits the value of the house purchased by those who do obtain financing 2 in an attempt to reduce the problems created by this mismatch a variety of alternative mortgage instruments amis has been suggested three of the most important are the graduated payment mortgage gpm the shared appreciation mortgage sam and the price level adjusted mortgage plam 3 with the gpm mortgage payments rise at some specified rate during a portion of the mortgage life the sam enables the lender to share in the appreciation of the university of colorado boulder and syracuse university respectively this paper was writ ten while the first author was at syracuse university funding for the research was shared by the office of the comptroller of the currency the federal horne loan bank board and the department of housing and urban development mary anne beeman served as research assistant and the manu

credit booms monetary integration and the new neoclassical synthesis abstract credit to the private sector has risen rapidly in many new central and eastern european eu member states nms in recent years the lending boom has recently been particularly strong in the segment of loans to households primarily mortgage based housing loans and in those countries that operate currency boards or other forms of hard pegs the main aim of this paper is to propose a conceptual framework to analyze the observed developments with a view to exploring some policy implications at a stage in which these countries are preparing for their prospective integration with the euro area to achieve this we first use a stylized new neoclassical synthesis nns framework which has recently been advanced by goodfriend goodfriend m 2002 monetary policy in the new neoclassical synthesis a primer federal reserve bank of richmond july and goodfriend and king goodfriend m king r 2001 the case for price stability nber working paper 8423 we then discuss the implications of the nns model for credit dynamics and ensuing monetary policy challenges specifically we emphasize consumption smoothing as an important channel of the observed credit expansion and we show how it is related to and how it affects the monetary policy making in ms in doing so we place our discussion in the context of the monetary integration process in general and the nominal convergence process in particular

transmission of the u s subprime crisis to emerging markets evidence on the decoupling recoupling hypothesis abstract we find that emerging markets appeared to be somewhat insulated from developments in u s financial markets from early 2007 to summer 2008 from that point on however emerging markets responded very strongly to the deteriorating situation in the u s financial system and real economy our regression event study focusing on 15 types of news indicates that a range of financial and real economic news emanating from the us had statistically and economically large impacts on 14 emerging markets and several news events uniformly moved markets policy measures taken in emerging markets to insulate themselves from global financial developments proved inadequate in the face of the credit crunch and decline in international trade that followed the lehman bankruptcy in september 2008

the great recession us dynamics and spillovers to the world economy abstract this paper provides an empirical investigation of both the within us and international channels of transmission of macroeconomic and financial shocks by means of a 50 country macroeconometric model estimated over the 1980 2009 period including measures of excess liquidity and financial fragility specifically designed in order to evaluate the relevance of the boom bust credit cycle view put forward as an interpretation of the recent great recession episode we find that such a view is consistent with the empirical evidence moreover concerning the real effects of financial shocks within the us we detect stronger evidence of an asset prices channel rather than a liquidity channel concerning the spillovers to the world economy we find that while financial disturbances are transmitted to foreign countries through us house and stock price dynamics as well as excess liquidity creation the trade channel is the key trasmission mechanism of real shocks

international house prices and macroeconomic fluctuations abstract the paper investigates linkages between general macroeconomic conditions and the housing market for the g 7 area among the key results of the paper we find that the us are an important source of global fluctuations not only for real activity nominal variables and stock prices but also for real housing prices secondly albeit distinct driving forces for real activity and financial factors can be pointed out sizeable global interactions are also evident in particular global supply side shocks are an important determinant of g 7 house prices fluctuations the linkage between real housing prices and macroeconomic developments is however bidirectional with investment showing in general a stronger reaction than consumption and output to housing price shocks implications for the real effects of the sub prime crisis are also explored

cross country effects of regulatory capital arbitrage abstract one reason for the recent asset price bubbles in many developed countries could be regulatory capital arbitrage regulatory and legal changes can help traditional banks to move their assets off their balance sheets into the lightly regulated shadows and thus enable regulatory arbitrage through the securitized sector this paper adopts a global vector autoregression gvar methodology to assess the effects of regulatory capital arbitrage on equity prices house prices and economic activity across 11 oecd countries regions a counterfactual experiment disentangles the effects of regulatory arbitrage following a change in the net capital rule for investment banks in april 2004 and the adoption of the basel ii accord in june 2004 the results provide evidence for the existence of an international finance multiplier with about half of the countries overshooting u s impulse responses the counterfactual shows that regulatory arbitrage via the u s securitized sector may enhance the cross country reallocation of capital from housing markets towards equity markets